Preamble

The House met at Half-past Two o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

PETITION (AIRCRAFT FACTORY, WINDERMERE)

Mr. Vane: I beg to present a Petition signed by more than 8,000 persons resident in or near Windermere and Ambleside who are distressed at the decision to dismantle the war-time aircraft factory in that district.
Wherefore your Petitioners pray for the retention of the Calgarth factory to accommodate a suitable, clean, light industry to provide employment with reasonable standards of living, to obviate the migration of young persons from the district, to create no nuisance to amenities, and to contribute to the national export drive, as is the duty of all. Your Petitioners, as in duty bound, will ever pray.

Petition to lie upon the Table.

Oral Answers to Questions — TOWN AND COUNTRY PLANNING

Hydro-Electric Schemes, Wales

Mr. Goronwy Roberts: asked the Minister of Town and Country Planning to what extent he has been consulted about proposals for large scale hydroelectric development in North Wales; and if he will make a statement.

Mr. H. D. Hughes: asked the Minister of Town and Country Planning what stage has now been reached in considering the proposals for the North Wales hydro-electric schemes; whether full consideration has been given to their effect on the amenities of the proposed national park; and whether local public inquiries will be held before sanction is given to any of these schemes.

The Minister of Town and Country Planning (Mr. Silkin): The British Electricity Authority have explained to repre-

sentatives of my Department the proposals which they have in mind and I am at present examining them. The proposals would require statutory authority and before any decision is taken to proceed with them the local authorities and amenity societies concerned will, as my right hon. Friend the Minister of Fuel and Power stated on 9th May, be fully consulted and he and I will carefully consider any representations which may be made. As the proposals will have to be submitted to Parliament in a Private Bill the question of public inquiry in the ordinary sense does not now arise.

Mr. Hughes: While thanking the Minister for that statement, may I ask whether he will draw the attention of the British Electricity Authority and the nation to the fact that the beauty of Snowdon is a more permanent feature of our national life than the fuel shortage; and will he take every possible step to make sure that no unavoidable damage will be done to this very important centre of our community?

Mr. Silkin: That is, of course, one of the obvious matters which will have to be taken into consideration.

Mr. Stokes: In these circumstances, will whatever charge is payable in the way of development be paid to the Central Land Board by the British Electricity Authority?

Mr. Silkin: I should like notice of that.

Mr. Stokes: Surely it is a matter for the right hon. Gentleman's Department?

Mr. Silkin: I said, that I should like notice of that question.

Mr. Emrys Roberts: Bearing in mind the assurance given me on 9th May by the Minister of Fuel and Power, that all local authorities and amenity societies will be fully consulted, would it not be desirable to call a conference in North Wales at the earliest possible opportunity of all these authorities and societies and representatives of the British Electricity Authority, so that the matter may be discussed round the conference table?

Sir Waldron Smithers: And the Minister.

Mr. Silkin: That may be one of the methods of consultation. I shall certainly consider it.

Mrs. Middleton: Can my right hon. Friend assure the House that alternative proposals, such as that for the utilisation of the Menai Straits for the production of electricity, will be taken into consideration before a decision is reached?

Mr. Silkin: Certainly every alternative proposal will be considered.

Mr. Skeffington-Lodge: Will the Minister see that consideration is given to the possibility of transmitting electrical current by underground cable in these cases, so as to avoid any possible despoliation of the landscape by pylons, and so on?

Mr. Silkin: We will consider that, of course.

Kensington Square, London

Mr. Skeffington-Lodge: asked the Minister of Town and Country Planning on what grounds he has decided to uphold the findings of the inquiry set up to consider the dispute between Messrs. John Barkers and the London County Council regarding the destruction of the house of W. M. Thackeray in Kensington Square; and whether this and other architectural features of the area will now be demolished.

Mr. Silkin: The development allowed by my decision following the inquiry into Messrs. Barkers' appeal does not involve the demolition of Thackeray's House or of any other building other than an annexe of no architectural merit at the rear of No. 45, Kensington Square. I am unaware of any proposal to demolish houses either in Kensington Square or Young Street.

Mr. Skeffington-Lodge: Does that mean that the square will in no way be spoiled or affected by the works which are to be undertaken?

Mr. Silkin: Yes, it does mean that.

Mr. Wilson Harris: Does the right hon. Gentleman not think that something better ought to happen to Thackeray's house than merely not being demolished; ought we not to preserve that house in the same way as Dickens' house in Doughty Street is preserved, in view of the fact that some of the best works in the English language were written in it?

Mr. Silkin: That may be so. All I can do under this appeal is to make certain that it is not destroyed.

Mr. Godfrey Nicholson: Will the right hon. Gentleman accept at any rate my thanks for his activity; and may I express the hope that he will carry on along those lines?

Mr. Stokes: In this instance also, in the event of development will the London County Council pay the development charge to the Central Land Board?

Mr. Silkin: There is no question of development by the London County Council. It concerns Barkers.

New Town, Mobberley

Mr. William Shepherd: asked the Minister of Town and Country Planning whether it is his Department's intention to utilise the proposed new town at Mobberley as a dormitory for Manchester.

Mr. Silkin: No, Sir. I have already made clear in an announcement in Manchester, that a necessary condition of my agreement is that the new community proposed to be established by Manchester Corporation shall be self-contained and independent, with its own industries, and shall not be a mere dormitory for Manchester.

Mr. Shepherd: In those circumstances will the Minister say why he has given this area over to Manchester? If it is not to be a dormitory for Manchester, why has he chosen to adopt this method?

Mr. Silkin: Because I thought it was a convenient method to get development in the circumstances, and it is a way of dealing with Manchester's overspill.

Mr. Shepherd: asked the Minister of Town and Country Planning whether he will state the type and number of industries to be carried on in the proposed new town at Mobberley.

Mr. Silkin: This is a matter which will have to be settled in consultation between Manchester Corporation, the Cheshire County Council and, of course, the industries and Departments concerned.

Mr. Shepherd: That answer surely means that the Minister has no assurance either from other individuals or in his


own mind that it will be possible to provide industrial occupations for people who are to be dumped into Mobberley?

Mr. Silkin: I have been asked the type and number of industries to be carried on, and I am saying that as Manchester will have to build the town, they will do so in consultation with the other Departments, but as to the type of the town there is no doubt at all.

Mr. Shepherd: Is the Minister able to assure the House that he himself is satisfied that it would be possible to provide in Mobberley all the occupations necessary for the people living there, and that the place will not become in reality a dormitory of Manchester?

Mr. Silkin: I give the House the assurance that that is my intention, to do everything I possibly can to carry out that intention.

Air Commodore Harvey: asked the Minister of Town and Country Planning, how many acres of agricultural land will be lost under the proposed new town scheme at Mobberley.

Mr. Silkin: Discussions are already in progress with a view to minimising the loss of agricultural land in the course of this development. The exact area to be developed has not yet been settled.

Air-Commodore Harvey: Does the right hon. Gentleman realise that the land he has in mind is the best agricultural land in Cheshire, and in this difficult time would it not be more economical to add to the existing towns which already have facilities for roads and surfaces?

Mr. Silkin: Every piece of land one goes to take is stated to be the best agriculture land in the area, but one does not exclude the other. The over-spill problem of Manchester is so large that the mere building of one or more towns will not satisfy it, and it will be necessary in addition to carry out a policy of enlarging the number of existing towns in Cheshire.

Mr. Manningham-Buller: The right hon. Gentleman said that the exact area could not be given. Could he give us any idea of the amount of agricultural land likely to be involved?

Mr. Silkin: I cannot, because our endeavour at the moment is to minimise agricultural land, and it is for that purpose that discussions are taking place with the Ministry of Agriculture.

Mr. Martin Lindsay: Does the right hon. Gentleman appreciate that, apart from this question of agricultural land, this is one of the most beautiful villages in one of the most beautiful parts of the country, and that it is absolutely fantastic to go ahead with this project?

Mr. Silkin: I presume the village referred to is Mobberley, and I hope we are going to enhance its beauty.

Mr. Selwyn Lloyd: asked the Minister of Town and Country Planning whether deep borings will be undertaken before the commencement of any building in connection with his Department's new town scheme at Mobberley, in view of the fact that as a result of deep borings which were carried out in the adjacent area, it was considered inadvisable to build on that site.

Mr. Silkin: The new town to be developed at Mobberley is to be built by the Manchester City Corporation and not by a Development Corporation under the New Towns Act. I shall, of course, satisfy myself in conjunction with the Corporation whether the proposed site when it is provisionally settled is suitable for development: and if I am advised that additional deep borings are necessary they will be carried out.

Mr. Selwyn Lloyd: When the right hon. Gentleman refers to additional deep borings being necessary, is it not a fact that the deep borings, which have taken place on the immediately adjacent land, have shown thick layers of rock salt; and is it not quite monstrous to risk public money on a new town in this area without taking deep borings?

Mr. Silkin: I quite agree, and we are endeavouring to avoid the areas where there is likely to be salt.

Mr. Scollan: Would the Minister tell the House why in the case of Mobberley he allows the Manchester Corporation to build it instead of the New Towns Corporation?

Mr. Silkin: Because I thought that Manchester were a responsible authority,


who had themselves already built one town at Wythenshawe, and they were anxious to build themselves. I thought they were capable of doing it.

Mr. Selwyn Lloyd: Will the right hon. Gentleman say quite definitely that he will see that deep borings are made, as he himself considers they were necessary in the adjacent area?

Mr. Silkin: I will certainly see that before this town is actually embarked upon that it is certain that there is no salt.

Mr. Selwyn Lloyd: asked the Minister of Town and Country Planning for what reasons he has rejected the proposals in the plan for Cheshire of the Cheshire Advisory Planning Committee to build up existing small towns, instead of developing new towns to take the overspill of population from Manchester.

Mr. Silkin: The hon. and learned Member is misinformed. I have never said that I intended to reject the proposals in the Cheshire Advisory Plan; I hope to give the county council in the near future a statement of my views on some of the main features of the plan.

Mr. Selwyn Lloyd: Is it not a fact that the county council's plan did not include a new town at Mobberley, and, therefore, in so far as the right hon. Gentleman is supporting the idea of the development of Mobberley, he is in effect rejecting the proposals of the county council?

Mr. Silkin: Not at all. The county council's plan provides for the enlargement of a number of existing towns, but that by itself will not be sufficient to meet the Manchester problem. I am not rejecting the enlargement of existing towns, but in addition there will have to be one or more new towns.

Mr. Baldwin: Does the Minister not consider that, instead of using up agricultural land for new towns, about which he himself is doubtful, it would be better to use the building material and other facilities to develop the agricultural land of the country and so help in the present economic position?

Mr. W. Griffiths: Is my right hon. Friend aware that the Manchester civic leaders of all parties believe that only by

pressing on with a project such as Mobberley and similar projects can the urgent housing needs of a large number of people in Manchester be met?

Mr. Silkin: That has certainly been the view impressed upon me.

Mr. Selwyn Lloyd: Is not the right hon. Gentleman aware that the Cheshire County Council proposals included the taking of an over-spill from Manchester up to 300,000, and that this project for Mobberley will only give accommodation for a few thousand? Is it, therefore, worth proceeding with the scheme?

Mr. Silkin: I think so, because, in fact, the Cheshire County Council proposals cannot accommodate the whole of the over-spill.

Oral Answers to Questions — NATIONAL INSURANCE

Offices, Kent

Mr. Baker White: asked the Minister of National Insurance what future arrangements are proposed for maintaining offices of his Department in Whitstable and Herne Bay.

The Minister of National Insurance (Mr. James Griffiths): Both these offices are being retained but as from 15th July next the Whitstable office will be open on three days a week only. This change is being made in view of the small public use of this office and of the necessity for staff economy.

Personal Case, Wallsend

Mr. John McKay: asked the Minister of National Insurance if he is aware that a married woman with four children applied for national assistance on the 18th June, 1949, as she was left with no money to buy food for her children, but was informed by the official at Wallsend, that she could have no assistance until Monday, 20th June; and if he will have this case thoroughly investigated and inform the Wallsend National Assistance officers that more sympathetic treatment was needed.

Mr. J. Griffiths: I have asked the Board to inquire into this matter and will write to my hon. Friend as soon as possible.

Mr. McKay: Is the Minister aware that this applicant had to go to the


National Society for the Prevention of Cruelty to Children where he got a better reception than at the National Assistance office? Is he also aware that there is a general feeling of dissatisfaction with regard to the spirit in which National Assistance is administered in Wallsend? Will he consider changing these officers for the benefit of Wallsend?

Mr. Griffiths: I have heard of no complaints. This complaint was put down in the form of a Question, and it is my duty first of all to inquire from the Board whether the facts are right or wrong. I will reply to the hon. Member as soon as I am able.

Mr. McKay: Is the right hon. Gentleman aware that I had to intervene in a personal case at Wallsend and that after the intervention a different attitude was adopted, which all indicates carelessness on the part of the officials?

Mr. Griffiths: This is the first complaint I have had. I was not aware that there had been any dissatisfaction.

Unofficial Strikers (Family Relief)

Major Guy Lloyd: asked the Minister of National Insurance what total amount of relief has been paid to the families of unofficial strikers since the beginning of the year; and what are the scales of relief in these cases.

Mr. J. Griffiths: I regret that the figures asked for in the first part of the Question are not available. As regards the second part assistance in these cases is assessed in accordance with the National Assistance (Determination of Needs) Regulations, 1948.

Major Lloyd: Would it be possible for the Minister to have a circular or pamphlet prepared to be issued during the period of unofficial strikes saying what amount of relief is given to strikers' wives and families in Russia and what happens to strikers here, whether the strikes are official or unofficial?

Mr. Griffiths: No, Sir. I remember what happened to them under a Tory Government.

Retirement Pensions

Sir Waldron Smithers: asked the Minister of National Insurance if the

amendment to the regulations to enable the retirement pension a woman may receive when her husband reaches the age of 70 or on his earlier death will require confirmation by this House.

Mr. J. Griffiths: The regulations to which the hon. Member refers have now been made. They are subject to the normal procedure of negative resolution.

Sir W. Smithers: Is this another instance that the Socialist Government can impose charges upon the taxpayer without asking this House?

Mr. Griffiths: No, Sir. This makes the benefit of a scheme available to a new class of contributor, and no extra charge is involved.

Office Staffs

Sir John Mellor: asked the Minister of National Insurance how many employees of the former approved societies, who are now employed by his Department, have been required, or will during the next twelve months be required, to work at places out of daily reach from their existing homes; and why.

Mr. J. Griffiths: Transfers of station are an inevitable incident of service in a large Department with a local office network, as a result of promotions, retirements and experience of local work loads. A number of such transfers have already been made and others will continue to be necessary. These transfers include certain former employees of approved societies in common with established staff recruited from other sources. I regret that the total numbers affected are not available but out of a group of 52 officers in one region recently given notice of transfer only 17 were from approved societies. All such transfers are carried out under a priority system agreed with the staff associations and every possible consideration is given to individual circumstances.

Sir J. Mellor: Is not the real reason for these transfers that the Minister grossly miscalculated the distribution of manpower required for his Department? Will not this cause great hardship among the people affected?

Mr. Griffiths: No, Sir. There was no gross miscalculation. If it is a miscalculation of 52 over 1,000 offices, that is not a


bad record. The arrangements made have been agreed by the staff. There will have to be transfers. The hon. Gentleman will not suggest that we should keep staff where there is no work for them. These arrangements are made in complete understanding with the staff associations.

Mr. David Renton: Does the right hon. Gentleman recollect the categorical assurances he gave during the passing of the National Insurance Act that the officials of the approved societies would as far as possible be absorbed and given every consideration? [HON. MEMBERS: "They are!"] Does he consider that this type of consideration is fulfilling his earlier pledge?

Mr. Griffiths: I gave an assurance that they would be absorbed in the new Ministry, and they have been. I gave an undertaking, which I have carried out, that as far as possible their new work would be as near their present homes as possible. One of the difficulties is that our scheme of administration is far more decentralised than was the old system, and that inevitably involves some transfers.

Workmen's Compensation (Settlements)

Mr. Oliver: asked the Minister of National Insurance whether he has now reached a decision as to the entitlement to sickness benefit under the National Insurance Act of workmen who met with accidents and received compensation under the Workmen's Compensation Acts and subsequently after 5th July, 1948, fall sick or become temporarily incapacitated as a result of their old accidents or in cases where they have received lump sum settlements under the Workmen's Compensation Acts before or after 5th July, 1948, subsequently suffer an incapacity attributable to their earlier accidents.

Mr. J. Griffiths: I would refer my hon. Friend to regulation 9 of the National Insurance (Overlapping Benefits) Regulations, 1948. Its effect at this date is that personal sickness benefit would normally be paid in full to persons who are totally incapacitated through injury by accident prior to 5th July, 1948, but if my hon. Friend has any particular case in mind perhaps he will let me know.

Hospital Patients (Allowances)

Sir David Robertson: asked the Minister of National Insurance why the advice of the National Insurance Advisory Committee is required to prove that 5s. per week is insufficient to meet the needs of tubercular and other long-term hospital patients for tobacco and/or cigarettes, haircuts, razor blades, toothpaste, stamps, writing materials, newspapers, magazines, books, clothes maintenance, and even an occasional drink.

Mr. J. Griffiths: This is a matter on which I am required by Section 77 of the National Insurance Act, 1946, to submit a preliminary draft regulation to the National Insurance Advisory Committee and to consider the Committee's Report before making substantive regulations. I am sending the hon. Member a copy of a circular issued by the Ministry of Health from which he will see that hospitals under the National Health Service are empowered to provide for their patients most of the articles enumerated in the Question.

Sir D. Robertson: Will the Minister take my assurance that the patients in the hospital which prompted this Question receive none of these articles? For his information, it is the County Hospital at Wick. Is it not a fact that these invalids receive 13s. a week in the bad old days of Toryism before the 1948 Act whereas they are now receiving 5s. a week? In an obvious case of hardship like this why does not the Minister act rather than wait from 5th July, 1948, to now?

Mr. Griffiths: First of all, I deny the statement about the old benefits and the new. Secondly, the whole matter is being investigated very carefully by the Advisory Committee. I am expecting their report within the next week or two. I shall publish it, and then there will be a full opportunity of discussing what we shall make as substantive regulations.

Mr. Shepherd: Can the Minister say how long this matter has been under consideration?

Mr. Griffiths: This is a very important matter which involves much more than the payment of benefit; it involves the whole treatment of long-term patients in hospital. The Committee has gone into


it carefully, has received a large number of representations and discussed it with workers in this field, and I am sure that its Report and recommendations will be after the fullest consultation.

Mr. Shepherd: When will the Report be ready?

Mr. Griffiths: I have already said that I am expecting the Report within the next week or two.

Oral Answers to Questions — EMPLOYMENT

Cost-of-Living Index

Mr. Piratin: asked the Minister of Labour by how many points has the cost-of-living index risen since it was decided to grant unemployment benefit to the extent of 26s. per week.

The Minister of Labour (Mr. Isaacs): The rate of 26s. applied in respect of the first benefit payable on or after 3rd June, 1948. Between mid-May, 1948, and mid-May, 1949, the interim index of retail prices rose from 108 to 111.

Mr. Piratin: In view of the increased cost of living in this period and likewise in the earlier period, will the right hon. Gentleman consider raising the amount of unemployment benefit at least in proportion to the increased cost of living, for which the unemployed cannot be responsible?

Mr. Isaacs: The question of the raising of the value of the benefit is not a matter for my Department.

Lieut.-Commander Gurney Braithwaite: Does the Minister endorse the statement of the Financial Secretary to the Treasury that the cost of living has now been readjusted in a downward direction consequent upon the reduction in the Beer Duty of 1d. a pint?

Mr. Isaacs: I do not make any observations on beer.

Mr. Gallacher: Is the Minister aware that 40 years ago the Foreign Secretary threw up a job at 28s. a week because he could not live on it? How is it possible for anybody to live on 26s. a week now when we take into account the value of the £ compared with 40 years ago?

Factory, Newport

Mr. Peter Freeman: asked the Minister of Labour whether he will now state when the new factory for disabled men will be started in Newport; how long it will take to complete; and what type of work it is proposed to provide.

Mr. Isaacs: I am not yet in a position to give definite information. I have the matter under consideration in consultation with the Remploy Corporation and will communicate with the hon. Member as soon as possible.

Ex-Service Trainees

Lieut.-Colonel Lipton: asked the Minister of Labour why training centres are not permitted to supply to prospective employers any reference as to character and ability of ex-Service trainees.

Mr. Isaacs: My hon. Friend is under a misapprehension. No such instructions have been issued and every trainee who satisfactorily completes a course of vocational training is given a certificate that he has done so. If my hon. Friend will let me have particulars of any case where he thinks something more might have been done I will look into it.

Lieut.-Colonel Lipton: Is the Minister aware that in at least one case, of which I will gladly give him details, the training centre refused to give any information about the man's character and ability, although it may well be that it gave the information to which my right hon. Friend has referred? Cannot the reference be extended to give more information to employers who want to give these men jobs?

Mr. Isaacs: We have given employers all the information for which they have asked. I have no knowledge of the case to which my hon. and gallant Friend refers, but if he will let me have particulars I will look into it.

Docks Dispute

Mr. Piratin: asked the Minister of Labour from what sources he obtained his information and what inquiries he made as to the docks dispute.

Mr. Isaacs: Information was obtained through the usual channels. [Laughter.] All necessary inquiries were made.

Mr. Piratin: I am sorry, Sir, I did not hear the last part of that answer because of the reasonable laughter at the first part of the answer.

Mr. Isaacs: The second part of the answer was that all necessary inquiries were being made.

Mr. Piratin: The last is even worse than the first, if I may comment. Will the Minister tell the House what are "the usual channels"? Really far more important, may I ask the Minister if he was not aware at the time of his statement in the broadcast that the Canadian Seamen's Union were fighting against—

Mr. Speaker: The hon. Member is not asking, a question, he is making a statement. He is giving information.

Mr. Piratin: On a point of Order, Mr. Speaker, I really want to find out the source of the information which the Minister of Labour had. [An HON. MEMBER: "Ask for it."] On a point of Order, Sir—[HON. MEMBERS: "Sit down."]—I want to establish my point to know whether I am on good grounds, for the reason that the Minister used on that occasion certain expressions, and it is important for this House to know whether those expressions were based upon bona fide information. Am I in order to pursue the matter?

Mr. Speaker: The hon. Member is not entitled to give information. He is entitled to say that he thinks the Minister is misinformed.

Mr. Piratin: Can I therefore ask the Minister if he can give the source of the information? Can he say whether, among other sources, he inquired of the Canadian Seamen's Union itself as to what the conflict was about?

Mr. Isaacs: There were two specific pieces of information which I published relating to the dispute. The only comments made upon the merits were a statement issued by the Canadian Trades and Labour Congress and a statement issued by the International Longshoremen's Association.

Mr. Piratin: In view of the fact that the particular union involved in this struggle was and is the Canadian Seamen's Union, how is it that the Minister of Labour does not find out from the

Canadian Seamen's Union in Canada what are the problems, but consults an organisation which is opposed to it, and on that basis how dare he speak in the name of this House—[HON. MEMBERS: "Order."]—to the country?

Mr. Isaacs: I do not want to become involved in an argument, but the fact is that the Canadian Trades and Labour Congress issued a statement. Their statement, coming from a responsible trade union organisation in Canada, I accepted, and still accept, as being in good faith—

Mr. Gallacher: Under dollar pressure.

Mr. Isaacs: The hon. Member for West Fife (Mr. Gallacher) cannot take it, can he? The International Longshoremen's Association, an organisation concerned with the loading of these ships, also published a statement. In view of the statements published by the Canadian Seamen's Union here, which are completely unreliable and untruthful, I could not accept anything from them.

Mr. Piratin: How does the Minister know?

Mr. Isaacs: Further, as I have no right to intervene in the merits of the dispute itself, I did not think it necessary to do so.

Agricultural Workers

Mr. De la Bère: asked the Minister of Labour whether he will now consider amending the Control of Engagement Order so as to permit of agricultural workers being free to choose their own occupation as a means of earning their livelihood.

Mr. Isaacs: I am keeping this question under constant review and will not retain this control any longer than is necessary.

Mr. De la Bère: Is the right hon. Gentleman aware that what might have been perfectly all right as a temporary expedient has now become an abuse, and that the continuance of this control over agricultural workers is a complete negation of democracy? Surely it ought to be done away with now? We want to keep as many people as possible on the land, but not against their will.

Mr. Isaacs: If the hon. Gentleman could give me any examples of where this has become an abuse, I will gladly have them examined.

Mr. Baldwin: Is the Minister aware that this Order is probably stopping more young men from coming into the industry, because of the fact that they will be under control, than it is in keeping men in the industry?

Mr. Isaacs: I am afraid that the hon. Gentleman has not got the right facts. Young people, indeed any persons coming into this industry, are free from control for a period which gives them an opportunity to see whether they want to settle down or not. I repeat what I have said before, that this matter is under consideration and that we shall not keep the Order a moment longer than we need.

Oral Answers to Questions — SCOTLAND

Housing

Sir William Darling: asked the Secretary of State for Scotland which county has had the most houses built during 1945–49; which county has had least built; and what is the reason for the disparity.

The Secretary of State for Scotland (Mr. Woodburn): Lanark built the most with 6,265, and Bute the least with two. The disparity is explained by the entirely different circumstances in the two counties.

Sir W. Darling: Has it escaped the notice of the Secretary of State that Lanark is represented by his hon. Friends while Bute is represented by one of my hon. Friends?

Mr. Woodburn: That indicates the intelligence of the people of Lanark.

Mr. McFarlane: Could the right hon. Gentleman say if any such factor as past achievement was taken into account when the right hon. Gentleman made the recent allocation of re-building in Scotland?

Lieut.-Colonel Sir Thomas Moore: asked the Secretary of State for Scotland on what basis he has authorised the house building programme during the remainder of 1949 and 1950 for the counties and burghs of Scotland; and how far does he consider that his programmes will meet the needs of the homeless.

Mr. Woodburn: The allocations to individual local authorities were made after a careful consideration of the needs of each area and of the amount of housing work already in hand so as to secure that the available labour and materials will be used to the best advantage for the completion of the maximum possible number of houses for the homeless.

Sir T. Moore: But how does the right hon. Gentleman reconcile that statement with the letter that I have in my hand from the Saltcoats Town Council which states that the right hon. Gentleman has approved the erection of only 58 houses out of the 1,000 required, and that they go on to say that it is only ministerial control which is hampering the progress that would otherwise be made by the town council?

Mr. Woodburn: If the hon. and gallant Gentleman makes a little further inquiry, he will find that the number of houses allocated is in keeping with the number of houses being built in that area.

Lieut.-Commander Clark Hutchison: asked the Secretary of State for Scotland when he proposes to grant power to local authorities to authorise them to issue licences for the building of private houses.

Mr. Woodburn: Local authorities may at present, with my approval, issue licences for new houses where national interest or special need can be shown. While the rate of building has recently improved, I am not satisfied that the time has yet come when we could remove the present control without prejudice to the building programmes of local authorities. I am keeping the matter under constant review, however.

Lieut.-Commander Hutchison: Does the right hon. Gentleman recollect that on 1st February the Joint Under-Secretary told us that he hoped to be able to make a more favourable statement after the end of March, and will he therefore, consider this question further?

Mr. Woodburn: As the hon. and gallant Gentleman will have noticed, some relaxation has been made in accordance with the principles I have detailed in the first part of my answer; but even in Edinburgh, which the hon. Gentleman represents, where a census was taken of


people requiring houses, only an infinitesimal proportion said that they wanted to buy a house.

Colonel Gomme-Duncan: Is it not a fact that we are at a considerable disadvantage compared with England in this matter of being allowed to build houses, which the English are allowed to do in a much bigger proportion than we are, and why should that be the case?

Mr. Willis: Is not the reason for that the fact that there was a lack of balance in the Scottish housing programme, and does not the recent allocation suggest that that has been rectified?

Mr. Woodburn: Yes, Sir.

Mr. Willis: asked the Secretary of State for Scotland what progress is being made with the experiments in interior wall finishing in Scotland; and what effects he estimates they will have on housing costs.

Mr. Woodburn: Four experimental houses in which prefabricated gypsum plaster panels are used for wall and ceiling linings have been completed and four more are under construction. The experts are now considering the results of these experiments and I am not yet in a position to state what effect they will have on housing costs.

Mr. Henderson Stewart: Are these new ideas being applied to aluminium prefabricated houses as well as to others?

Mr. Woodburn: No aluminium houses, of course, are now being made in Scotland. This matter is being investigated by the firm who formerly made the aluminium houses with a view to the incorporation of these ideas if they prove satisfactory.

Mr. Willis: In view of the very desirable reduction in cost which it is suggested that this method will bring about, could my right hon. Friend say when he will be able to give us some more specific information?

Mr. Woodburn: This development has created a great interest among all the building people in Scotland and, I believe, also in England. They are all investigating this question, especially with a view to saving the delays occasioned by the lack of plasterers.

Mr. Scollan: Has my right hon. Friend the Secretary of State taken into consideration the question of the susceptibility of this type of wall-finishing to fire?

Mr. Woodburn: My information is that it is quite resistant to fire.

Mr. Leonard: asked the Secretary of State for Scotland if he has any information as to how many local authorities operate a house allocation system which provides for a reallocation of tenancies amongst families that have grown to a point of overcrowding; and those whose numbers have decreased.

Mr. Woodburn: The management of local authorities' houses is placed by statute in the hands of local authorities themselves and I have no precise information about the extent to which tenancies are re-allocated when family circumstances change. Local authorities have undoubtedly been able to make a considerable contribution to housing where they have been able to make suitable transfers. I have asked the Scottish Housing Advisory Committee to survey local authorities' methods of allocating tenancies and I understand that the Committee are considering the need for such re-allocations.

Spectacles

Sir W. Darling: asked the Secretary of State for Scotland how many applications have been received for spectacles; how many have been supplied; and at what date may all applicants expect to have their needs met.

Mr. Woodburn: The number of persons found to be in need of glasses up to the end of May was approximately 775,000, of whom over 410,000 persons had been supplied. The waiting period at present varies from three to six months. The output of glasses is increasing and numbers of new applicants diminishing, so I expect that the waiting period will now quite rapidly decrease.

Sir W. Darling: Can the right hon. Gentleman answer the Question? How many applications have been received; not how many have been approved.

Mr. Woodburn: The point is the number of persons who were found, after they had applied, to be in need of glasses. We do not record the number of people who apply.

Sir W. Darling: My Question was how many applications have been received. I was anxious to ascertain consumer demand.

Major Lloyd: Is it not a fact that there were a large number of shortsighted people in Scotland in 1945?

Mr. Henderson Stewart: Can the right hon. Gentleman indicate to the House whether he applies, and if so how, any scheme of priorities to those most urgently needing spectacles?

Mr. Woodburn: A certain amount of influence has been used in the case of children in special circumstances, and the people supplying these glasses have been very considerate. The demand has been overwhelming, showing the great need in past years that has never been met.

Lieut.-Colonel Sir Thomas Moore: Can the right hon. Gentleman say whether foreign eyesight has proved more sensitive or less sensitive to shortness than the British variety?

Mr. Woodburn: I have no particulars of any foreigner who has been able to wait long enough in this country to get glasses. However, I have details of the number of mythical and other foreigners who have received dental treatment, and only 12 cases have been treated in Scotland, mostly for emergency toothache.

Maintenance Orders

Lady Tweedsmuir: asked the Secretary of State for Scotland if he intends to introduce legislation this session to facilitate the reciprocal enforcement of orders for aliment and maintenance in Scotland and England.

Mr. Woodburn: I am in consultation with my right hon. Friend the Secretary of State for the Home Department with a view to introducing legislation on this subject when time permits.

Lady Tweedsmuir: Can the Secretary of State give any indication as to whether it will be soon, in view of the reply given by the Home Secretary in February that legislation would be introduced soon?

Mr. Woodburn: We are both anxious to do this but, as the hon. Lady knows, there has been a good deal of complaint about our pressing the House to pass too

much legislation and we are reluctant to force the pace any quicker,

Colonel Gomme-Duncan: Cannot the right hon. Gentleman persuade his colleague to take out some of the nonsense and put in this useful Measure instead?

Loch Goil (Inquiry)

Mr. Leonard: asked the Secretary of State for Scotland if he has yet received the report of the inquiry into the proposed closing of Loch Goil; and when its findings will be announced.

Mr. Woodburn: The report of the Commission appointed to hold the inquiry has been received and I hope that a decision can be announced soon.

Road Accident, Glasgow

Mr. McGovern: asked the Secretary of State for Scotland if he is aware that another child has recently been killed between Wellshot Road and Chester Street, Shettleston, Glasgow, by a Scottish Motor Traction omnibus; and if he will draw the attention of the police to the excessive speed of these omnibuses and take steps to have these infringements of the law stopped.

Mr. Woodburn: I am aware that on 22nd May last a boy aged 10 years was knocked down and fatally injured in Shettleston Road, Glasgow, just West of Chester Street, by an omnibus owned by the Scottish Motor Traction Company, Limited. The boy ran from behind an East-going tramcar into the path of the omnibus and I understand there is no evidence that the omnibus was travelling at an excessive speed. Shettleston Road, like other main traffic thoroughfares in Glasgow through which omnibus services are operated, is given regular attention by the police road patrol and there is no evidence of any regular tendency by drivers of omnibuses to exceed the speed limit in that street.

Mr. McGovern: As a considerable number of children have been killed in and about this area, and as these buses do, in fact, travel at an excessive speed—I have seen them do so repeatedly—would the Secretary of State sympathetically consider approaching the Ministry of Transport with a view to diverting the limited stop buses proceeding to Edinburgh, Airdrie, and other places so as to


make use of the Edinburgh road instead of going through a congested area with narrow streets?

Mr. Woodburn: I have already approached my right hon. Friend, who will, no doubt, look into this question.

Lord John Hope: Does not the remedy lie in more stringent action being taken by schools to teach children how to cross roads and to avoid traffic?

Tuberculosis Cases

Mr. Hubbard: asked the Secretary of State for Scotland how many pulmonary tuberculosis cases in Scotland are awaiting hospital treatment.

Mr. Woodburn: At 31st December, 1948, the latest date for which complete figures are available, the number was 2,598.

Nurses (Training)

Mr. Hubbard: asked the Secretary of State for Scotland the number of nurses, trained, and undergoing training in Scotland for the years 1947, 1948 and 1949 respectively.

Mr. Woodburn: The numbers on the Register at 31st March in each of the years 1947, 1948 and 1949, were 18,101, 19,216 and 19,761 respectively. The numbers in training at the same dates were 6,084, 6,133 and 6,968.

DISABILITY PENSIONS

Mr. Granville Sharp: asked the Minister of Pensions whether it is his practice in claims for disability pensions for diabetes where it cannot be proved conclusively that war service did not cause or aggravate the complaint, to give the applicant the benefit of the doubt and to award a pension.

The Minister of Pensions (Mr. Marquand): The Royal Warrant requires me to give a claimant the benefit of any reasonable doubt whether in regard to diabetes or any other disease, and this is invariably done.

Mr. Sharp: In view of the conflict of medical opinion about the cause and development of diabetes, and in view of the fact that it is not always possible for a Service man to produce a correct day-to-day record of his active service, is

my right hon. Friend satisfied that he always gives Service men the benefit of the doubt?

Mr. Marquand: Yes, Sir. This disease has been considered very carefully indeed by the tribunals and by the High Court; rules have been laid down and precedents established. We try our best to follow the rulings given by the courts and tribunals and if we fail the applicant always has the right of further appeal.

Oral Answers to Questions — BRITISH ARMY

Field-Marshal Montgomery (Speech)

Mr. Piratin: asked the Secretary of State for War whether his attention has been drawn to the speech made by Field-Marshal Lord Montgomery at Whittington Barracks, near Lichfield, on 12th June in the course of reviewing troops, in which he made a political attack on Communism; whether this speech was made with his authority; and, in view of the series of such speeches which have been made by senior officers, what steps he proposes to take to ensure that these officers do not take advantage of their positions of authority to make political speeches.

The Secretary of State for War (Mr. Shinwell): I have not seen the text of the speech referred to, but only a brief report in the local Press. The contents of the speech were not submitted to me for prior approval, nor is there any reason why they should have been. Field-Marshal Lord Montgomery is now holding an international appointment and I am not responsible for his actions.

Mr. Piratin: In view of the fact that Field-Marshal Lord Montgomery holds rank in the British Army and that, I believe, he draws a salary from His Majesty's Government, the Secretary of State must take some responsibility; and is my right hon. Friend aware that among other things the Field-Marshal on this occasion said that the Army is fighting Communism—[HON. MEMBERS: "Hear, hear."]—and that the best way to fight Communism was to train young men to fight it? Therefore, may I ask the Secretary of State for War whether he approves of those statements and whether they are in accord with Government policy?

Mr. Shinwell: With Lord Montgomery's present capacity I have no responsibility. Besides, I find it very embarrassing to have to explain away speeches made by other people.

Major Lloyd: Is it not a fact that the whole Christian world is fighting Communism?

Mr. Sydney Silverman: Does my right hon. Friend's first answer mean that the fact that Lord Montgomery holds an international appointment has the result that he is free from the restrictions on political speeches that bind all other officers serving in His Majesty's Forces?

Mr. Shinwell: I have already expressed myself in reply to other Questions on speeches made by high-ranking officers, and I hardly think it necessary to say more.

Mr. McGovern: Could the right hon. Gentleman induce the hon. Member for Mile End (Mr. Piratin) to appeal to the Soviet generals to stop their inflammatory speeches?

Officers' Wives, Near East

Sir Waldron Smithers: asked the Secretary of State for War, if he has considered details which have been sent to him concerning the conditions under which officers' wives live in the Near East; what immediate steps he is taking to rectify the position; and if he will make a statement.

Mr. Shinwell: I am having inquiries made into the various representations made in the correspondence forwarded to me by the hon. Member. I will write to him as soon as possible.

Sir W. Smithers: Is the Minister not ashamed that recruiting is so slack and will he in future cease to blame the wicked Tories?

Mr. Shinwell: I am certainly not ashamed of the recruiting position. The present position is not at all unsatisfactory, but in so far as there are difficulties they are due to factors which are unfavourable and over which we have no control.

FIELD-MARSHAL MANSTEIN (DEFENCE)

Mr. Stokes: asked the Secretary of State for War whether he is aware that lawyers defending Field-Marshal Manstein applied to him by letter of 10th June

for documents now in the United States of America for use in the defence; and whether he can state the date by which all those documents will be made available and where.

Mr. Shinwell: As I have no control over the custodians of the documents if they are in the United States of America, I cannot say when they will be received, but, subject to their availability, no time will be lost in producing them for inspection by German counsel.

Mr. Stokes: Is my right hon. Friend aware that the counsel have asked for at least three weeks' margin between the time they receive the documents and the time the trial takes place, and in view of his assurance that full time will be allowed will he assure the House that that period at least will be given?

Mr. Shinwell: We place no obstacle in the way of German counsel obtaining these documents. On the whole, we have treated them very reasonably.

Mr. Stokes: That does not answer by question. Can my right hon. Friend assure the House that if there is delay in supplying these documents, which are essential and at present are not very conveniently placed, the trial will be put off until a reasonable time has been allowed for their study?

Mr. Shinwell: Advantage might be taken of such delays, and we must bring this person to trial.

Mr. Stokes: Then can my hon. Friend—

Mr. Speaker: We cannot go on for ever on this one Question.

Mr. Stokes: In view of the fact that my Question which was a perfectly simple one has not been answered I beg to give notice that I shall raise this matter on the Adjournment, as soon as possible.

DECORATIONS AND MEDALS

Colonel J. R. H. Hutchison: asked the Secretary of State for War whether he will arrange that medals for gallantry, especially those awarded to foreign nationals, shall not be sent to the recipients by post but be presented at some suitable function.

Mr. Shinwell: I would refer the hon. and gallant Member to an announcement which appeared in the Press on 18th December, 1945, on the subject of the presentation of decorations and medal, of which I am sending him a copy. With regard to foreign nationals every effort is made to ensure that the presentation of awards is carried out with appropriate ceremony.

Major Tufton Beamish: Will the right hon. Gentleman bear in mind that in the Communist dominated countries of Eastern Europe one can do nothing worse than make a public presentation to anyone who backed the British during the war?

Mr. Lipson: asked the Prime Minister why the medals awarded to ex-Service men and women do not bear the name of the recipient and, as this has caused great disappointment, if he will recall them and make good the omission.

The Prime Minister (Mr. Attlee): I would refer the hon. Member to the reply which I gave to the hon. Member for Streatham (Sir D. Robertson) on 23rd March, 1948. The reply to the second part of the Question is in the negative.

Mr. Lipson: Why was it not practicable this time to follow the precedent of the 1914 war, when medals bore the name and number of the recipient, and as the medal is a personal matter will not the Prime Minister reconsider his attitude?

The Prime Minister: If the hon. Gentleman will study the previous reply which I gave he will find a very full answer. I am not aware of any great feeling on this matter; all the evidence is to the contrary. It has been pointed out that it is possible for a very small sum to have the name put on the medal, but if a demand had been made for the names to be put on all the medals it would have meant a long delay, which would have caused a great deal more dissatisfaction than the omission of the names.

Mr. Emrys Hughes: After the previous war a large number of ex-Service men had to pawn their medals. Will not this idea facilitate it?

Colonel Gomme-Duncan: Would the right hon. Gentleman consider making a

small financial grant to people who have medals engraved with their names, as that cannot be done by Government Departments?

The Prime Minister: No, Sir.

Mr. Gallacher: Is the Prime Minister aware that a comrade of mine had three medals sent to him last week. Would I be in order in telling him to throw them in Montgomery's teeth?

Hon. Members: Withdraw.

Air-Commodore Harvey: On a point of Order, Mr. Speaker. Is it in Order for the hon. Member to insult a senior officer of the British Army who is representing this country in an international organisation?

Mr. Gallacher: rose—

Mr. Speaker: It is one of those offensive remarks to which I think we need pay no attention.

Mr. Gallacher: Further to that point of Order. If Lord Montgomery tells British lads in the Army that their job is to fight me—

Mr. Speaker: Major Legge-Bourke.

Major Legge-Bourke: Will the Prime Minister bear in mind that since he gave that answer in March the House has been informed that only 2 million out of 5 million who are eligible have claimed their medals? Will he consider whether or not the reason for that is the fact that the medals are not engraved?

The Prime Minister: That is not my information. My information is that complaints on this score are very few and that far more people would be glad to have a medal now than wait for the long time which will be necessary if all the medals are to be returned and stamped. I think that the hon. and gallant Member is wrong in this matter.

Major Legge-Bourke: Surely the figures deny that statement.

Mr. Scollan: Is it not the case that the great majority of those who took part in the last war, some of whom took part in the previous war, do not want their medals simply because they want to forget all about wars?

The Prime Minister: I think that my hon. Friend is wrong there, too.

Oral Answers to Questions — NATIONAL FINANCE

Sterling (Devaluation Proposals)

Mr. Platts-Mills: asked the Chancellor of the Exchequer what proposals he has received from the Marshall Aid authorities to the effect that sterling should be devalued.

The Chancellor of the Exchequer (Sir Stafford Cripps): None, Sir.

Mr. Platts-Mills: Is it not a fact that although there may have been no formal proposals, which is, I suppose, the excuse for the answer we have just been given, my right hon. and learned Friend is exposed to relentless pressure to accept this devaluation—

Mr. Speaker: Imputations and innuendoes are not correct in asking supplementary or other questions.

Mr. Platts-Mills: Is it not correct that he is exposed to this relentless pressure which I have just mentioned, and that all sections of our country are bitterly opposed to accepting this surrender to the Americans?

Sir S. Cripps: No, Sir. There has been no pressure upon me whatever.

Mr. Ivor Thomas: If the Chancellor is to counteract the suggestion that sterling is possibly to be devalued will he not have to say something much stronger than he has hitherto said? Will he say that he will resign rather than devalue?

Sir S. Cripps: I shall not change my party at all events.

Mr. Ivor Thomas: Is the Chancellor aware that there would be no need for him to do so, as he was expelled from the party?

Mr. Osborne: Would the Chancellor say whether in his opinion these devaluation dangers would have arisen at an earlier date but for the Marshall Aid which we have already received?

Sir S. Cripps: No, Sir. I am not prepared to answer any question except that on the Paper.

Dairy Congress, Sweden (Currency)

Mr. Hurd: asked the Chancellor of the Exchequer why some of the delegates

to the International Dairy Congress in Sweden who are not members of the staff of either the Ministry of Agriculture or the Ministry of Food have been refused any special allowance of foreign exchange to attend the annual conference in Sweden; and if he will ensure that representatives of the Milk Marketing Board, the National Farmers' Union and such organisations are given the necessary currency facilities.

Sir S. Cripps: I am not responsible for the selection of the United Kingdom delegation to this Congress, the arrangements for which have been co-ordinated by my right hon. Friend, the Lord President of the Council, in consultation with the British National Committee of the Congress and the Government Departments concerned. I am bound to set a limit on the total amount of foreign currency which can be made available for overseas conferences of this kind, and I must confine the grant of special allowances to the members of the delegation selected in this way. I understand, however, that my right hon. Friend, the Lord President of the Council, at present has under consideration the question of including representatives of the National Farmers' Union and the Milk Marketing Board in the delegation.

Colonel Gomme-Duncan: Will that include the National Farmers' Union of Scotland?

Sir S. Cripps: I am afraid I cannot say without notice.

Notes and Gold (Statistics)

Mr. Peter Freeman: asked the Chancellor of the Exchequer how many pound notes and ten shilling notes are now in circulation; and what is the amount of gold in the Bank of England.

Sir S. Cripps: On 28th February, 1949, the end of the Bank of England year, there were 968,719,000 pound notes and 177,708,000 ten shilling notes in circulation. The Issue Department of the Bank of England holds gold to the value of £247,833.

Mr. Freeman: Is it not a fact that the gold in the Bank of England now bears no relationship to the value of the notes issued; and could my right hon. and learned Friend say what purpose it now


serves? Would it not be better to sell that gold and have something more valuable in its place?

Sir S. Cripps: There is plenty of value behind the backing of British currency without that gold.

Mr. Oliver Stanley: I think that the right hon. and learned Gentleman inadvertently said £247,000.

Sir S. Cripps: No, I said quite accurately in
The Issue Department of the Bank of England.
That is all I am dealing with.

Mr. Stokes: Was the value of the gold expressed in monetary terms or real gold value?

Sir S. Cripps: It was expressed in sterling, as I have stated.

Mr. Osborne: At how much per ounce is it reckoned?

Sir S. Cripps: I could not say how many ounces are represented in £247,000.

Mr. Osborne: How much is it worth per ounce?

Sir S. Cripps: I cannot tell the hon. Member but I imagine it is the sterling value.

ANGLO-ARGENTINE TRADE AGREEMENT

The following Question stood upon the Order Paper in the name of Mr. WILLIAM TEELING:

65. To ask the Chancellor of the Exchequer whether he will make a statement on the Anglo-Argentine Trade Agreement; what protests he has received from foreign countries concerning its effects on agreements made by His Majesty's Government with other countries; and what replies he has made.

At the end of Questions—

Sir S. Cripps: With permission, I will answer Question No. 65.
I am glad to inform the House that the Anglo-Argentine Trade and Payments Agreement was signed in Buenos Aires yesterday. I hope that it will be possible to publish the full text of the Agreement in a White Paper early

next week; we must of course, await receipt of a duly authenticated copy, which is being sent by air.
I am satisfied that this very comprehensive agreement will be of substantial advantage to both countries and will strengthen their economies. It is also the opinion of His Majesty's Government that the agreement is not inconsistent either with our long-term objective of convertibility and multilateral trading or with the obligations which we have assumed in regard to third countries.
The Agreement provides that all payments shall be in sterling and that both parties shall endeavour to ensure the approximate balance of payments at the highest possible level. Hitherto we have imported from Argentina more than we have exported to her. Argentina has now agreed to give facilities which will allow for our exports to be approximately doubled as compared with 1948. This will obviously require a special effort from our exporters. The Argentines are, however, willing to take a very wide range of our products. There is no reason why we should not increase our exports to Argentina without prejudicing our exports to the dollar area.
The only long-term contract to be made under this Agreement is for meat. Under the agreement, we have been given a firm undertaking that we shall receive not less than 300,000 tons of carcase beef, mutton and lamb in the first year, and in addition the Argentines will use their best endeavours to supply not less than 400,000 tons each year. Our undertakings in respect of other imports, and the Argentine's undertakings in respect of United Kingdom exports, are conditional upon agreement on prices and quality, and trade will be conducted through the customary channels.
I should like to pay tribute to the negotiating skill of our Ambassador, Sir John Balfour, and his team and to the readiness of Senhor Bramuglia and his colleagues to co-operate in reaching agreement on the difficult problems which inevitably arose in such comprehensive negotiations.
I would suggest that questions on the details of the Agreement should be postponed until the White Paper is available.

Mr. Teeling: While thanking the right hon. and learned Gentleman for that


statement, may I ask him if we may now hope that the negotiations for the acquisition of the remaining British-owned utilities and the payment of compensation for such acquisition, not referred to in the Agreement, will be immediately approached in the same friendly spirit as was the Agreement, and if we may hope that those people who have suffered much by long waiting have not been forgotten by either side?

Sir S. Cripps: The Argentine Government were left in no doubt in the course of our negotiations of the importance which we attach to the settlement of the affairs of public utilities, but, in that connection, I would refer the hon. Gentleman to a similar answer given to a question on 22nd June by my right hon. Friend the Foreign Secretary. There has been no change in that situation since.

Captain Crookshank: Like the right hon. and learned Gentleman, we would wish to congratulate the Ambassador on the success of his efforts, and, while we recognise that we cannot very well ask for more details now, there is one question of paramount importance, if the Chancellor can answer it. How does the price suggested under the present Agreement compare with the price that was paid under the previous agreement?

Sir S. Cripps: There has been a considerable increase in the price of the meat. The average overall price for beef, mutton and lamb is £97.536 per ton.

Mr. Maclay: May I ask the Chancellor whether the Governments of the Dominions, and particularly Canada, were kept generally informed during the negotiations and on the broad lines on which agreement was likely to be effected?

Sir S. Cripps: I think the answer is "Yes," but I would not like to say definitely without consulting my right hon. Friend the Secretary of State.

Mr. Stokes: May I ask my right hon. and learned Friend whether he is aware that, however well this Agreement may be received in this country, as it undoubtedly will be, it will be enthusiastically received by the working folk of Argentina who wish for friendly relations with this country?

Mr. Henderson Stewart: May we now hope that credits will quickly be made available for the payment for that vast quantity of British machinery which has been ordered by the Argentine, which has long been ready to send but could not be sent for the last 18 months on account of the delay in reaching this agreement?

Sir S. Cripps: We hope that all the channels will now be rapidly opened up?

Mr. George Porter: Is my right hon. and learned Friend aware that the "Daily Express" yesterday said that this trouble with the Argentine would never have arisen if the Opposition, when they had their day, had done the right thing as a Government?

Mr. Thomas Reid: May I ask if the American Government agree with the Chancellor that there has been no violation of international agreements?

Sir S. Cripps: I think their attitude is made quite clear by the statement put out this morning.

Colonel Crosthwaite-Eyre: Can the right hon. and learned Gentleman say anything on the very important point of the gold guarantee which is alleged to be part of this Agreement?

Sir S. Cripps: I would prefer the hon. and gallant Gentleman to leave that until he sees the document.

Mr. Walter Fletcher: Is the increase in the price of meat, which is very nearly 1s. or over 11d. per pound, going to be passed on to the consumer or not?

Sir S. Cripps: That will be dealt with, as was stated in the Budget, in regard to subsidies.

INTRA-EUROPEAN PAYMENTS SCHEME

Mr. Eden: (by Private Notice) asked the Chancellor of the Exchequer whether he has any statement to make about his recent discussions in Brussels and the forthcoming meeting of the Commonwealth Finance Ministers.

Sir S. Cripps: As the House is aware, I visited Brussels last week to meet M. Spaak, M. Petsche and Mr. Harriman for a further discussion on the form of the Intra-European Payments Scheme and


allied subjects. No conclusions were arrived at, but the meeting was adjourned until tomorrow in Paris, when there will be a further meeting of the Consultative Group, followed by a full meeting of the Council of O.E.E.C. at the Ministerial level. I am leaving for Paris this afternoon so as to have the opportunity of a further talk with M. Spaak before the Consultative Group meets tomorrow morning. I cannot, therefore, give the House any information now, but I will certainly do so after my return from Paris. I hope that in the meantime the matter will not be made more difficult by exaggeration. Discussion of these matters is indeed one of the objects of O.E.E.C.
I am certain that the common determination to work for European co-operation and for the liberalisation and multilateralisation of European trade will lead us to a solution of our problems.
For the moment I cannot give any more information about the meeting of Empire Finance Ministers.

Mr. Eden: May I ask the Chancellor to accept the fact that everybody on all sides of the House will wish success to these discussions, and may I also ask him if he will bear in mind that the more he can keep this House informed the less danger there will be of exaggeration outside it?

Sir S. Cripps: I am much obliged to the right hon. Gentleman for what he has said, and I certainly will keep the House as fully informed as I can, but, as he will appreciate, it sometimes happens that we have to agree not to make statements about negotiations when they are at a certain stage.

STRIKE, LONDON DOCKS

Mr. Eden: (by Private Notice) asked the Minister of Labour if he will make a statement about the unofficial strike in the Port of London involving over 2,000 men.

Mr. Isaacs: Yes, Sir. At the Surrey Docks some 950 stevedores are on strike causing 11 ships to be idle. At the Royal Docks approximately 2,850 dockers and stevedores are on strike causing 19 vessels to be idle of which 11 are food ships. I very much regret that

this trouble has broken out again. Last week, when there was a strike of stevedores, the Executive of the Stevedores Union decided, with a full knowledge of the facts, to advise their members to work all ships. This decision was re-affirmed on Thursday. Normal working was resumed on Friday morning last and continued over the weekend, but on Monday morning stevedores in the Surrey Docks stopped work again. In the course of the day the stoppage spread to the Royal Docks, involving dockers as well as stevedores.
I have been informed today that the Stevedores Union will reiterate their decision that all ships will be worked. A small number of members of the Transport and General Workers' Union are also involved, but the Executive have assured me that they are taking all possible steps to ensure that there is no extension of the stoppage so far as their members are concerned.
Apparently a fresh dispute broke out during the week-end between members of the Canadian Seamen's Union in London and the Canadian Shipowners, this time it seems over the interpretation of an agreement governing the re-engagement of the crew of one of the Canadian ships, the other Canadian ship having been sold to new owners and no question of re-engagement arising.
I am sure the House will agree that we in this country are not concerned with the merits of this fresh dispute and that it is intolerable that our trade and our recovery should be interfered with in this way. It is abundantly clear that the Communists, in their support of the Canadian Seamen's Union, are completely indifferent to the loss and hardship that may be occasioned to our dockers and their families and the rest of the community. These disruptive elements represent only a small minority of the men and the men must realise that unless they assert themselves in loyalty to their own Union, they are betraying the interests of the vast majority of their fellow trade unionists. They should resume full normal working without delay.

Mr. Eden: If I heard the right hon. Gentleman aright, among these ships held up there are 11 food ships. If that is so, can he tell us whether there is any danger


of perishable foodstuffs having, in consequence, to be destroyed or becoming unusable and whether the Government propose to take any steps to avoid such an occurrence?

Mr. Isaacs: I am advised that there is no danger as yet to the food in these ships. Secondly, strenuous efforts are being made by the Stevedores' Union to get their men to resume work. Thirdly, the Government will not permit this food to be wasted.

Mr. Gallacher: Is not the Minister fully aware of the fact that one of the most valiant traditions of the British working-class movement is that British workers have always been prepared to stand by their comrades from other countries? Is this not an exhibition of working-class loyalty on the part of the dockers? I am asking the Minister whether he agrees that that is right or not. Is it not an exhibition of loyalty on the part of the dockers towards their working-class comrades from Canada? Why does the right hon Gentleman keep repeating this childish plea about Communism? If we could stop the docks in London why do we not stop the docks all over the country?

Mr. Isaacs: The hon. Member has made a speech about loyalty. I assert here, without any hesitation, that if the trade union movement is to maintain the confidence of the people the loyalty of the members of the union is to their own trade union and not to a lot of imported agitators whose only purpose in this particular case is not to win a strike in Canada, but to disturb the flow of merchandise in our ports.

Mr. Gallacher: That is always what the Tories say.

Mr. Platts-Mills: Is not my right hon. Friend ashamed that he should allow his position to be used to disrupt the solidarity of the British dockers?

Mr. Isaacs: The hon. Gentleman asks me if I am not ashamed. The hon. Gentleman, who represents a working-class constituency in London, ought to

be ashamed of the lead he has given to cause the trouble and confusion which is being caused.

Mr. Henry Strauss: Is the right hon. Gentleman convinced that he is obtaining better results by appealing to the men on strike to be loyal to their trade union—with which I agree—rather than appealing to them to be loyal to the nation?

Mr. Isaacs: The hon. and learned Gentleman did not hear my statement aright. My appeal was not only for loyalty to the trade union but for loyalty to the community. The question I was asked was about trade union loyalty, and trade union loyalty should be to those whom the men have elected.

PERSONAL EXPLANATION

Mrs. Braddock: I rise with your permission, Sir, to make a short personal statement. It will be within your recollection, Sir, when certain newspaper reports were brought to your notice about the scenes in this House on the conclusion of the Report stage of the Transport Bill, you were unable to allow me to raise it as a case of Privilege. In view of the number of Members, officials, journalists and public who were present at the time I felt bound to take legal action.
In case, therefore, you, Sir, or any of my fellow Members may think that in any legal action I took I wished to cast disrespect on the House itself, I should like to say that nothing was further from my mind. It was to maintain its acknowledged prestige that I took the legal action I did. May I say that I regret any inconvenience caused to any of my fellow Members who were summoned to give evidence in the courts, and may I express my gratitude to the House for allowing this to be done?
I am grateful to you, Sir, for permitting me to say this because I want to make my personal position quite clear as regards my respect for the House of Commons.

Orders of the Day — FINANCE BILL

Considered in Committee. [Progress, 27th June.]

[MAJOR MILNER in the Chair]

New Clause.—(DEPENDENT RELATIVES ALLOWANCE.)

Subsection (1) of section twenty-two of the Finance Act, 1920 (which, as amended by subsequent enactments, provides that where a claimant maintains an infirm or aged relative or widowed mother of his or his wife's whose total income does not exceed one hundred and twenty pounds a year he is entitled to a deduction of fifty pounds reduced, if the total income of the person maintained exceeds seventy pounds a year, by the amount of the excess, and provides for a like deduction in respect of the services of a daughter resident with an aged or infirm claimant), shall have effect as if the words "one hundred and fifty pounds" were substituted for the words "one hundred and twenty pounds," the words "sixty pounds," were substituted for the words "fifty pounds" and the words "ninety pounds," were substituted for the words "seventy pounds."—[Viscount Hinchingbrooke.]

Brought up, and read the First time.

3.45 p.m.

Viscount Hinchingbrooke: I beg to move, "That the Clause be read a Second time."
This new Clause in the name of a number of my hon. Friends and myself is with respect to dependent relatives allowances. At first sight, it looks very complicated, but I assure the Committee that it is a Clause which has immensely respectable antecedents and, with the assistance of the Committee, I hope to give the allowance even more virtue and substance than it has had before. The Clause is designed to ease the position of a claimant—and there are about a million of them in the country today—who maintains an infirm or aged relative or a widowed mother. There is also a subsidiary class of claimants who are themselves aged or infirm and have resident daughters living with them.
The object of this Clause is to raise the allowance from £50 to £60 and to lift the brackets within which the allowance is payable to £90 and £150 respectively. I think probably all hon. Members who have had anything to do with this matter

in public life or who have been Members of the House for any considerable period, will know in detail the history of this allowance and, therefore, I shall not repeat it now. Suffice to say that the allowance was originally recommended by the Royal Commission on Income Tax in 1919 and was for the first time embodied in the Finance Act of 1920. It has been amended and enlarged on a number of occasions since then—in 1927, 1943 and 1947.
May I first make a point about the allowance itself? It appears to me that the £50 is now out of line with the other allowances which are obtainable—for example, the £60 allowance for the child and the £70 allowance for a wife, being the difference between the marriage allowance of £180 and the single allowance of £110. I therefore suggest that the allowance should be raised by £10 to bring it in line with the child allowance. I must point out the anomaly which exists today in that a child who may be incapacitated or invalided and who is under 16 years of age receives £60, whereas the moment he or she passes his or her 16th birthday the allowance drops to £50. I think it is only fair that we should all acknowledge that the cost of maintaining invalid children would, if anything, go up rather than down, with their wider interests as they grow up. The allowance ought to be maintained at £60.
Secondly, with regard to the brackets. The present brackets within which the allowance works are £70 and £120 respectively. Where the income from all sources of the maintained person is £70 or less the full allowance is operative, but when we get beyond the £70 the allowance tapers off pound by pound until, when the maintained person has an income from all sources of £120, it disappears altogether as far as benefit to the claimant is concerned. It seems to me that both brackets are too low today in relation to the cost of living and to the general level of pensions and earnings.
For example, since the last concession was made in 1947 by the present Chancellor of the Duchy the cost of living has risen nine points. I have the figures here in money values and could give them. But the thing is apparent. It seems to me it is miserly—quite miserly—for the Treasury today to stop the allowance when the maintained person is earning


£2 6s. a week, which is not, after all, a very princely weekly sum. The Clause, is therefore, designed to help those persons—and, as I say, there are about a million of them—on whom the burden of the maintenance of relatives falls very hardly in these times.
If the Chancellor had been prepared to do something about Purchase Tax this year, that might have been a way in which we could have assisted these people even more notably than in this, but that possibility having been ruthlessly removed by the Treasury we are forced on this side of the Committee to look for ways and means, within the general frame of the Income Tax laws, for assisting these people. I do not know at all what the cost of this concession would be. It may be £10 million or £20 million. If it is £20 million it is only a half of the 1 per cent. of what the Treasury are extracting from the pockets of the people.
I do not know, but it seems to me that the Financial Secretary is unusually unhappy this year. Poor man, he has not been allowed to open his shoulders one little bit in this Committee, whereas under what in many ways was the more unfortunate dispensation of the Chancellor of the Duchy there was usually £30 million or £40 million to play about with on the Committee stage. And I have seen the face of the Financial Secretary glow once or twice during our Debates two or three years ago, when opportunity was given to him by the then Chancellor to make some concession. I do hope that he has so prevailed upon the right hon. and learned Gentleman today, the fourth day of our Debates in Committee on this Bill, as to be able to come down here to give us—who, after all, are trying to represent the state of living of some of these people so desperately hit by the right hon. and learned Gentleman's general financial policy—some concession, and help remove a burden that now exists.

Lieut.-Commander Gurney Braithwaite: I am sure the Committee will be grateful to my noble Friend for bringing before us this extremely benevolent proposal. My recollection is not quite the same as his regarding the past activities of the Financial Secretary on previous occasions. I seem to recall that the right hon. Gentleman was never given

the opportunity of making concessions, but was invariably left on the burning deck in order to resist proposals, and that it was always the role of the Chancellor to take the bows and the applause. Today the Financial Secretary has an opportunity—or the Economic Secretary has—to meet us in this matter.
My noble Friend has pointed out with profound truth that the cost of living has not kept pace with the concessions that have been made during the lifetime of this Parliament under this particular heading; that there has been a further rise; and that it would be right and proper for us to take cognisance of that, and to make an effort, by the adoption of this Clause, to bring the law into line in this matter of aged dependants. They are, as my noble Friend has said, a small but particularly helpless minority. Whereas the concession will be made to the young and active, in many cases the effect of it will benefit those aged and infirm relatives whom they are maintaining.
The other part of the Clause is designed, of course, to help the aged persons themselves. To assist the infirm is, after all, one of the noblest actions of which the human race is capable. I think it would be appropriate and proper if today we were to take regard of the fact that the cost of living, since we last adjusted the matter during the lifetime of this Parliament, has risen, and I hope very much that the Economic Secretary, who, I understand, is to reply to the Debate on this new Clause, will open our proceedings today, the fourth day, in admirable fashion by telling us that the Government have agreed to accede to my noble Friends' proposal.

The Economic Secretary to the Treasury (Mr. Douglas Jay): I think it was a little hard of the noble Lord the Member for South Dorset (Viscount Hinchingbrooke) to say that my right hon. Friend had not so far opened his shoulders during these proceedings, because, as a matter of fact, he did hit two boundaries off successive balls just before we ourselves on this side, strictly in accordance with the rules, I hope, declared the innings closed last night.

Viscount Hinchingbrooke: It did not cost anything.

Mr. Jay: I do not think that is correct. The noble Lord correctly rehearsed the history of this particular allowance, and he and the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) have spoken very persuasively in moving this further concession. Of course, we would all sympathise with their desire to assist the aged and infirm. However all that both hon. Gentlemen have said could have been said with equal force at whatever level this allowance stood. If we made this concession this year and enlarged the scope of the allowance, it would still be possible to advance very much the same arguments a year hence.
So I am afraid what we have to look at is not simply the merits of this Clause, but the claim of this particular allowance in relation to the other allowances under Income Tax, and, indeed, other claims of remission of taxation. When we do that the first thing which appears, as the noble Lord quite correctly said, is that this allowance has been increased no fewer than three times, and twice in quite recent years. It was increased in 1927, again in 1943, and yet again in 1947.
4.0 p.m.
By the Finance Act, 1943, the allowance was increased from £25 at which it had originally stood, to £50 in any case where the relative's income was below £30, and in those cases where it lay between £30 and £80 the amount of the allowance was to be £50 less the excess over the £30, as I think the noble Lord pointed out. In the Finance Act, 1947, we made a further substantial concession in that we raised the lower limit of £30 to £70 and the higher limit of £80 to £120. I think, therefore, that having gone so far, the case cannot be made out for extending this concession any further unless, indeed, the cost would be trivial. In point of fact, the cost of operating this new Clause would not be trivial; it would amount to £7 million, which is quite considerable. For these reasons I do not think we can accept it this year.
The noble Lord invoked to aid his argument the rise in the cost of living. That is a very natural claim to put forward for the people concerned, but I think the Committee will agree that if the Government were to accept that argument as sufficient in itself for making

increases in payments of this kind, or indeed of other kinds, that undoubtedly would be the way to inflation, and it would be out of line with our White Paper policy and our general policy of disinflation.

Lieut.-Commander Braithwaite: Has it not always been the policy of this and, indeed, of other Governments to select for protection against the effect of inflation the aged and infirm members of the community in particular?

Major Legge-Bourke: The Economic Secretary has given a somewhat limp answer to the points which have been made by my noble Friend the Member for South Dorset (Viscount Hinchingbrooke). This is the only new Clause to which I have put my name because I believe it concerns such a deserving cause. Hon. Members are always in difficulty when trying to decide which are the most worthy causes, and my own feeling is that there could be few more worthy causes than this. I say that because I believe that, apart from anything else, it is always highly desirable that as many people as possible should look after the least fortunate in their own families instead of putting them on the State.
The whole principle which lies behind the original measure is a happy compromise in which we have an individual trying to look after the less fortunate members of his family and at the same time the State giving him some reward for doing it. The Economic Secretary has merely questioned the extent to which that reward should be given. My own feeling is that there is a much better case for this Clause than there was yesterday for the two Clauses which were accepted. The Economic Secretary says that his right hon. Friend hit the Opposition and their Amendment for a boundary yesterday, but I should have thought that all he could really say was that he finished up in the dark with a 1s. 3d. cinema ticket and a dog licence. That is confusing sports and entertainment a little, but if that is considered hitting a boundary, I am afraid the right hon. Gentleman could only have had experience on the river rather than with a cricket bat in his hands.
This new Clause is very fair in view of the increase in the cost of living. The Economic Secretary said that the increase


in 1943 over the original amount was from £25 to £50. I should have said that there was certainly that increase in the cost of living in that period, and I should say that there has also been a small increase since 1947, as my noble Friend said. I believe that although this proposal would cost £7 million, it is much better that we should do it this way than have a demand for increased social services or something of that sort, because that would seem to be the alternative.
If these people are really going to be put into a difficult financial position, the State has an immediate remedy by making it possible for the National Assistance Board to help them out. Surely, it is much more desirable that individual families should try to help these people and should be given some reward for so doing. My own feeling is that the reward would be much cheaper than would be the case if the National Assistance Board had to be authorised to make good the loss of income owing to the rise in the cost of living. Therefore, I hope that the Financial Secretary will reconsider this matter. If he cannot accept it, perhaps he will go further into it. I certainly believe that it is a highly estimable and desirable new Clause, and I hope the Committee will give it support.

Mr. Boyd-Carpenter: The Economic Secretary's argument appeared to indicate that he was feeling the heat because it was not up to his normal controversial standard. He began by saying that at whatever figure these allowances were fixed an argument could be adduced for raising them. That may be so, but that is no argument for maintaining the present figure. It is no argument for simply ignoring the changes in the general price level since 1947, and it is no argument at all for the present figure. I think the Economic Secretary will agree that he was rather below his standard when he put forward that argument.
The Economic Secretary's much more interesting and important point was in his inflation argument, and I should like to say a word upon it. The hon. Gentleman said, perfectly truly, that concessions of this sort have an inflationary effect, but he did not seem to me at all to face the intervention of my hon. and gallant Friend the Member for Holderness

(Lieut.-Commander Braithwaite) as to whether it was his intention and the intention of the Government to apply that doctrine at its most rigorous to the aged and infirm. As I understand the theory in broad terms, it is that we should restrict the amount of spending power generally available in the hands of that part of the community which can look after itself. That is the general argument, whether it be valid or invalid. I should, no doubt, be out of Order if I pursued that question.
I have always understood that every effort had at the same time to be made to insulate from its effect certain special classes such as the aged, war disabled and children. Surely that is the case which is presented again and again from the Box opposite. That is surely directly material to this point. The figure of £7 million which the Economic Secretary gave was lower than that which my noble Friend had intimated was his impression. This comparatively small amount would be concentrated upon the worst hit section of the community—that part of the community who have to maintain aged and dependent relatives. Hon. Members on both sides of the Committee know perfectly well of many cases in which that imposes an all but intolerable burden upon hard working and responsible individuals and particularly upon those individuals whose sense of self-reliance and responsibility leads them to seek to maintain their dependent relatives rather than cast family burdens upon the community.
All hon. Members know of cases of that sort; they are pathetic cases, and I should have thought that the case for giving some limited relief in that direction cannot be met by broad generalisations about anti-inflationary policies. It calls for at least a reply which indicates, as the Economic Secretary's reply did not indicate, that the Government have seriously gone into the merits of this question. It demands a considered reply which indicates the same appreciation of the hardships involved. I trust that the very moderate and reasonable concession for which my noble Friend asked will not be brushed aside with the airy and ill-considered generalisations with which the Economic Secretary regaled the Committee.

Mr. Charles Williams: Frankly, I was amazed at the smallness of the sum which the Economic Secretary said would be needed for this proposal. I thought it would have been considerably more. I have a very large number of cases of this type in my own constituency; again and again I have endeavoured in one way or another to obtain relief, and on several occasions a considerable amount of relief has been given to these people. In that estimate of £7 million, I wonder whether any deduction has been made in respect of the fact that if it was not for the maintenance given by these relatives a considerable number of the dependants would be obliged to apply for State assistance. These people who take care of their dependent relatives are doing something which in a large number of cases has to be borne by the State.
As has been pointed out by one or two hon. Members on this side of the Committee—incidentally, no hon. Members opposite have taken the trouble to support these old people—these people who take care of their dependent relatives are relieving the State of a large burden, a burden which is quite likely far larger than the £7 million which the relief proposed in this new Clause would cost. That £7 million, of course, would not carry the whole burden but it would be an immense relief to those people who are trying to do their best to look after their own families.
I should like to raise a point which has not been mentioned today. It is not always very easy, especially in these days of housing shortage, to have an aged person in one's house. It is not very easy to have in one's house any of the classes mentioned in the new Clause. In many cases, as a result of the housing shortage, members of the community have taken on this obligation and have tried to help their own families. Very often there is a whole family plus another person in one house, as those of us who know the poorer sections of the community realise, and that makes available a larger amount of accommodation for the rest of the community. This is being done entirely voluntarily by those people for whom we are asking a concession.
4.15 p.m.
This matter of helping one's own family has always been one of the strongest virtues of the British people. It is a matter on which I have heard the Home Secretary make brilliant speeches. Perhaps I ought not to say "brilliant," but doing his best to advance somewhere along the road towards brilliancy. I do not want to exaggerate matters, because I do not think exaggeration is right, but it is an undoubted fact that we should do everything possible to encourage family life. In this case, an enormous job of work is being done by individuals to help the State, a job which carries out the high traditions of our race. Surely some concession might be made in this case. The amount involved is not large.
I understand that the Chancellor of the Exchequer has gone away, or will be going away very soon. Why does the Financial Secretary not take the law into his own hands in the absence of his right hon. and learned Friend? If he will do so we shall back him up, and in all probability, when the Chancellor of the Exchequer returns, he will not sack him but will be thankful for what he has done. For some unknown reason it is only the Conservative minority who speak for these people. It has always been the privilege of our party to be the main defence for the elderly. I am astonished that no Member opposite has so far taken part in this Debate, or has yet turned down this proposal. In those circumstances, it is very wrong of the Government to take this obdurate view towards this proposal.

Sir Stanley Reed: Cannot the Financial Secretary answer the appeal which has been made to him in one sentence, namely, that owing to the probable rate of national expenditure neither he nor the Chancellor of the Exchequer can abate taxation by one shilling? It would be far more realistic on their part to put that plain fact before the Committee. The right hon. Gentleman has not dared to tell the Committee that, despite the rise in the cost of living and the very strong case of these people, he cannot make any adjustment because no taxation relief can be given until the total volume of national expenditure is reduced. I know that the right hon. Gentleman will ask how the national expenditure can be reduced, but that is


not our business but his. I ask him to adopt the maxim of Napoleon to his marshals, that if it is difficult it is done, and if it is impossible it will take a little time.

Mr. Oliver Stanley: I hope that the Economic Secretary will forgive me if I do not follow him in the realm of cricketing metaphors. Sporting metaphors are always dangerous. For example, we might have the Solicitor-General indulging in metaphors drawn from his experience on the turf, which would be most embarrassing to many of us. I must confess that I share my hon. Friends' disappointment with the answer that has been given. It seemed to me to be a machine-made answer, with very little if any relevance to the case we are now considering. The stock answer is, of course, that any increase in taxation relief is an inflationary movement. It is true to say that in some degree any release of purchasing power is inflationary in its tendency, but I cannot understand why that argument should be adduced for a proposal such as this, when no such argument is adduced if it is a question of giving £20 million to those who drink beer. I should have thought, speaking both economically and otherwise, that the £20 million to beer drinkers was likely to be the more inflationary.
The fact is, of course, that the Government are now in a position where expenditure is so high that they are unable to give a concession however meritorious or well deserved. The right hon. Gentleman referred to two concessions which were made last night. It is quite true that there were two concessions, but it was not that those new Clauses were more desirable for the sake of human happiness than the many other new Clauses that have been discussed, but merely because the concessions cost no money. It was on that ground and that ground alone, that the Government made them.
I should like to have a little more information on this figure of £7 million. I understood it was a Treasury estimate of the loss of revenue they would suffer, but has there been any attempt to put against that, any decrease in social service payments which might otherwise be made? These people who will benefit are all in low income groups, and cer-

tainly the probability is that in most of these cases the rise in the cost of living, which the right hon. and learned Gentleman has said is not to be remedied by taxation reliefs, will have to be met by increased assistance payments. If, as I suspect, the saving by the Treasury in refusing this proposal is to some extent off-set by the increased expenditure which is to fall on some other Department, I would far rather, for the sake of the pride and independence of the people concerned, that the relief, if it is to be given by the Government, should be given in this form instead of in the other form which, however humanely it is done, still has the appearance of charity payments.
The Opposition in dealing with these new Clauses, are always in the difficulty that they are not allowed to select the particular taxation relief to which they give the greatest priority. The eagle eye of the Chair goes through the new Clauses and excludes a number of them, not on grounds of intrinsic merit, but on such grounds as whether they have been discussed in some other form, or whatever the appropriate grounds may be. It means it is not necessarily the case that the particular proposal we are able to put forward, is the one to which we give the highest priority, which is the case here. I would not say, even if the Government by a reduction of expenditure had the money available, that this was necessarily the highest of all priorities, but it is certainly one that is a high priority. As far as I am concerned, unless the Government are prepared to make some concession, I shall go into the Division Lobby to vote against the position in which the Government are now in, that owing to the high rate of expenditure to which they are committed they find themselves impotent to give any concession to any cause however good.

Colonel Haughton: I wish to associate myself with those who comprise our little party representing that part of the United Kingdom from which I come. We get a good opportunity during the Committee stage of the Finance Bill to make our pleas to the Treasury, and I feel that in this matter a case has been made out. We know that the Chancellor of the Exchequer and the Financial Secretary cannot meet all the pleas that are made, but I hope that they will not disagree with this one, because those who have looked


after the old and infirm know what a hard task it is in many cases. The suggestion put forward is very reasonable indeed, and I hope it will not be turned down.

Mr. Nigel Birch: There are two points I should like to make. The Economic Secretary said, quite rightly, that a good case can be made out for a concession of this sort at whatever level allowances are standardised. The point is that the allowances are out of line with the allowances given in the case of a wife and four dependent children, and that the Economic Secretary completely failed to answer. It is clear that there is always a good case, whatever the allowance may be, for making it better, but there is certainly a case for making the allowances fair one with the other.
The second point is one that has already been partially made, and that is the consequences of the Chancellor's policy of deflation by taxation. I believe that we should now use the word "disinflation," which I will use because the right hon. and learned Gentleman attaches a particular importance to that fig leaf which I will not snatch away from him. If expenditure is at this level and the Government try to balance things by raising taxation, they are bound to produce a condition where the cost of living rises steadily, as it has risen steadily since 1947 and as it is likely to continue to rise.
The right hon. and learned Gentleman said that what we want to do is to stop incomes and wages rising, regardless of the cost of living. There is something to be said for that, although it is a rather gloomy policy, but what occurs, in fact, is that wages follow the cost of living a small move behind, whereas dependent relatives and people of that sort do not move upwards at all. They are, therefore, ground between the upper and nether mill-stones. We want to put on record that, as a result of the present policy, the faces of people like this are being ground in the dirt.

Mr. Hugh Fraser: The tendency, one gathers from reading parts of the Report on Population, is to have more and more elderly people in this country, precisely the sort of people who will to some extent be benefited by this new Clause. It is worth remembering

that if these people do not fall on the private charity of the family, they will fall on the charity and assistance of the State. From the national point of view, it must be clear that these small reliefs in respect of dependent relatives will make life very much easier for them than can be the case in an institution, which undoubtedly for many of them will be the only alternative. It is no great concession to make; the alternative is whether the money is to go to honest tax relief or for ignoble public assistance. Perhaps that is an over-simplification, but I hope the hon. Gentleman will give the matter more sympathetic consideration than it has been given hitherto and will accept the Clause.

4.30 p.m.

Mr. Jay: As serious arguments have been advanced on this point I should like briefly to reply. The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said that my main argument for regarding the allowance as being at the correct level at present was that at whatever level it stood, it could be argued that it should go higher. That was my comment on what was said by the noble Lord the Member for South Dorset (Viscount Hinchingbrooke); it was not my principal argument. We have made three increases in the allowance in recent years, two of them in very recent years. It has been said, rightly, that there is a special case for helping the aged and infirm, and we were asked whether it was not our general policy, although following, generally, a disinflationary policy, when the cost of living rose, to moderate its impact on those least able to face it. That is our policy; that is why we have subsidised the cost of living, among other things, and why the work of the National Assistance Board is, as we all agree, conducted along humanitarian lines.
All the arguments about special claims on behalf of the aged and infirm, however, could be advanced equally cogently in the case of the general mass of old age pensioners who are living below the Income Tax level, and of whom I have a large number in my constituency as, no doubt, has the hon. Member for Torquay (Mr. C. Williams). In all the circumstances, I think it would be unfair to make this concession, strong as the arguments are, if we could not do something comparable for the large number of people


who are, on the whole, worse off—old age pensioners living below the Income Tax level. Finally, the right hon. Member for West Bristol (Mr. Stanley) said, very candidly, that he did not regard this proposal as having the very highest priority among the taxation reliefs which he and his party would wish to obtain. That is also our position. Having looked at possible reliefs, both before the Budget and since, we agree that in all the circumstances we do not put this in the very highest priority class which we are able this year to accept.

Viscount Hinchingbrooke: As the Committee wishes to get on, I do not intend to take up more than a few minutes, but I must say that the arguments adduced by the Economic Secretary amount in my view to little or nothing. The hon. Gentleman said that two concessions had been made in recent years, and suggested that this was a reason for doing nothing now. The point is that since the last allowance was made the cost of living has gone up by seven points, so that the time has now arrived to make a further step forward. It may be that if we got this concession now and the cost of living rose 10 or 20 points we should have to try again to get fairness for these people. I should not have asked for a concession of this kind unless the need for it had been due to the deliberate policy of the Government during the last few years.
The hon. Gentleman said we should be justified in doing this only if we were to make comparable concessions to the general class of old age pensioners. In 1947, when this particular allowance was increased, nothing was done for pensioners then; the increase followed something done for pensioners a year or two previously. Is it not reasonable to take things by stages? For various reasons we now want this extra concession for this class of people, and in a few years it may be necessary to do something for the whole class of pensioners. It is not right to suggest that nothing should be done until the whole thing is lined up, because legislation has never proceeded in that way.
The hon. Gentleman made no impression upon me at all in what he said about inflation. If it is the deliberate instruction of the Chancellor that every Amend-

ment and new Clause is to be turned down on the grounds that it will cost 2½d., and will lead to inflation, why should right hon. and hon. Members opposite prepare any briefs in connection with specific Amendments and clauses at all. In fact they do not do so. We are finding out that there is no attempt to argue on the merits of any of our proposals.
This concession would cost £7 million. I am not seeking to unbalance the Budget by gaining an exemption of this kind today; I am suggesting that it should be granted, and that the Government themselves should save the inflationary position by reducing their own expenditure. What produces inflation is the aggregate of personal and Government expenditure. It is logical for us on this side to argue that inflation can be held by granting a concession and the Government meeting that concession by the same amount in a reduction of expenditure. That could be done in hundreds of ways, as we have detailed many times and which I would like to develop now if it were not out of Order. I regret that the hon. Gentleman has not been able to meet us, and I can only hope that in the night hours he and the Financial Secretary will reconsider the matter and bring it forward again either on Report or next year.

Question put, and negatived.

New Clause.—(AMENDMENT OF SECTION 3 OF FINANCE ACT, 1920.)

Subsection (2) of section three of the Finance Act, 1920, shall have effect as if for the words "nineteen hundred and twenty," "nineteen hundred and forty-nine" were substituted, and as if for the words "ten pounds, ten shillings and tenpence," "seven pounds, seventeen shillings and sixpence" were substituted.—[Mr. James Stuart.]

Brought up, and read the First time.

Mr. James Stuart: I beg to move, "That the Clause be read a Second time."

Captain Crookshank: On a point of Order. Before we go any further, Major Milner, could you tell the Committee whether the subject matter of this Clause deals merely with whisky, or whether gin and other spirits come within its scope?

The Chairman: It appears to me that all spirits are included.

Mr. Stuart: I cannot actually claim the indulgence of the Committee in speaking today, but may I preface my remarks by saying that, unaccustomed as I am to speaking in this Chamber, I hope the Committee will bear with me for a short time? It may be of some interest to note that I copied this Clause, except in so far as the amounts are concerned, from a similar Clause moved on 7th July, 1927, by my old friend the late Mr. Fred Macquisten, former Member for Argyll. I wish he were here to perform this task today. He represented, and I represent, a constituency which has perhaps more interest in the whisky trade, along with Banffshire, than any other part of Britain. Both he and I always felt strongly on this matter.
Although I am not a total abstainer the interest of my hon. Friends and I does not lie in the fact that we wish merely to obtain cheaper alcoholic drinks; it is far more than that. Tens of thousands of pounds have been poured into the building of great distilleries; there is the question of local employment—a matter of great importance to our constituents—and also the agricultural side of the problem, distilleries being the best market for the best malting barley that our farmers can produce. In 1927, Mr. Macquisten argued that the rate of duty on whisky in those days, which was £3 12s. 6d. on a proof gallon, amounted to £300 to £350 tax on an acre of malting barley. If that be the case, then the present rate of duty, which is £10 10s. 10d., on a proof gallon, works out at about £900 on an acre of good barley. That is a terrible tax.
Quite apart from that, there is the question of the revenue itself, in which I know the Financial Secretary will be interested because I was present with a deputation which waited upon him at the Treasury a few weeks ago. We had a friendly reception, and I hope the right hon. Gentleman will be equally friendly today. At a deputation in the Treasury the Minister cannot, of course, take any action; he can only listen and reply, all of which the Financial Secretary did with the greatest courtesy. But here, in this Committee, he is in a position to go a step further, and I hope he will not fail to assist us on this occasion.
I am very sorry that the Chancellor himself is not here today, because I am

sure he would be kindly disposed towards us. I do not suggest that he is very keen on the absorption of alcoholic liquor, but during the war I had the privilege of working with him for some months when he was Leader of the House and I was then occupying the position occupied today by the Parliamentary Secretary to the Treasury—it is with the greatest difficulty that I can refrain from calling him my right hon. Friend. Although the Chancellor and I did not always agree on everything we were next to being a couple of cooing doves, and I cannot help thinking that if he were here today he would view this proposal favourably. I can only hope that he has left instructions with the Financial Secretary to do what he would have done had he been here himself.
I shall not go into details because my hon. Friends behind me will do that and elaborate this case. I referred to the fact that the duty in 1927 was £3 12s. 6d. per proof gallon, and that I was associated with the former Member for Argyll who, in those days, moved to reduce the duty to 30s. The duty has now risen to over 10 guineas, and, as I think is clear to anyone, the domestic consumption of whisky in particular has dropped steadily throughout the last half century. It is most extraordinary that the Government should adopt their present attitude to our own industry, that is to say, penalise it by excessive taxation while, at the same time—and I am not criticising their action—helping the French wine trade by reducing the duty on wines so as to allow us to have cheaper French wines.
4.45 p.m.
The French, as we know, have always done everything to assist and foster the wine trade in France because it is one of their primary industries. Well, here we have a product of Scotland which I believe cannot be imitated in any other part of the world, yet we do everything in our power, not to foster it but to murder it. In Scotland, when we lay golden eggs we very much dislike having our necks wrung; and I may say that these eggs, as the Financial Secretary knows very well, have been of the purest gold—or they may be paper now—throughout many years.
I shall not go into a lot of detail, but I hope that this new Clause will be viewed with sympathy. It affects local employment; it affects agriculture very materially, and it affects the revenue. If the present duty is maintained it cannot fail to kill this industry, which I am sure we should all view with regret. I know that America produces her own Bourbon and other whiskies; they put a very considerable duty on Scottish whisky, and naturally keep their own Bourbon sufficiently cheap to encourage people to drink it. That is quite natural. I do not know whether the Chancellor can rely upon maintaining this export trade. I believe it to be a maxim that an export trade cannot be maintained unless there is a healthy home industry to back it up. Well, the way things are going today, we shall soon not have any home industry, and I therefore hope that this new Clause will be viewed favourably.

Mr. Duthie: I wish to support this new Clause as strongly as possible. I, with other hon. and right hon. Members who sponsor this Clause, represent an area in which whisky distilling is an extremely important industry. Indeed, in the whisky distilling areas of Scotland this industry is just as important as coal is to the Welsh valleys. As my right hon. Friend has said, whisky production is a basic factor in the economy of our Highland glens, where we are circumscribed by the nature of the country to the growing of two cereal crops, and two only: barley and oats. The outlook for oats is far from encouraging, and we now view with very grave apprehension indeed the outlook for our barley, because the outlet for our barley is in the distillery which is hard by. The barley, in conjunction with the local water and the local climate, is responsible for the production of Scottish malt whisky, which is the finest thing of its kind in the world, and is so estimated.
We hear and have heard a great deal in this Committee about the Highlander and what the Government aim to do to help the Highlander. The Highlander looks upon this duty with a great deal of shrewd suspicion and misgiving, because he sees his one great national industry being murdered by this prohibitive taxation. In pleading for the reduction of the

whisky duty, I should imagine that we on this side, in supporting this new Clause, were following on the efforts of the Secretary of State for Scotland, the Minister of Agriculture, and the President of the Board of Trade, for they should be leading the fight for a reduction of this duty. Whisky is all-important to Scottish farming and to our export drive, because it is the greatest single dollar earner, and without a substantial and healthy home trade, whisky exports cannot be maintained.
This is not a question of temperance reform. I am not myself a whisky drinker, but that is entirely by the way. This is a question of the survival of what to us in Scotland is a key industry. Nothing that this Committee can do in the field of taxation can alter the desire for alcoholic stimulants on the part of the people. Taxation, however, can to a very large extent determine what people shall drink. The price of whisky has become quite prohibitive, and its place is being taken by all sorts of concoctions, some of them straight drinks, but others what I might term to be veritable hell brews which are definitely more deleterious to the human body, the human frame and the human mind than whisky.
What is happening in the liquor trade? Let us look at comparative spirits which bear relatively the same duty as whisky. In 1948 we imported 30 per cent. more brandy than in 1938. In 1948 we imported three times more rum than in 1938; in addition, vast quantities of rum were being imported for manufacture into gin. In 1938 brandy imports were 523,000 gallons; in 1948, 702,000 gallons. In 1938 rum imports were 1,737,000 gallons; in 1948 the amount of rum imported for beverage purposes was six million gallons—and that does not include about three million gallons imported for commercial purposes and for distillation into gin. In 1948 the total consumption of whisky in the home market was 2¼ million gallons; it was more than twice that in 1938.
I submit that it is unfair that these imported liquors, which function in more or less the same field as whisky, should bear a duty comparable with that on whisky. Whisky deserves some preference, if for nothing else than that it is a native product from beginning to end.


I further maintain that it is grossly unfair that six million gallons of rum should be available for retail sale in this country, while our own native product is restricted to 2¼ million gallons. This Finance Bill gives concessions to French wines, yet this perfectly just case for our own one national beverage is ignored. I think I ought to give these figures for the benefit of the Committee. In 1910 the duty on whisky was 11s. per proof gallon. Today the duty per proof gallon is 210s. 10d.—20 times greater than it was in 1910. Today the full retail price of a bottle of whisky is 33s. 4d.; that is, if it can be got at the price the distillers hope it can be bought for. The, wholesale price is 29s. 2½d., which includes tax of 24s. 7d. The net wholesale price after tax is deducted is 4s. 7½d. At the wholesale level whisky is bearing what is tantamount to a Purchase Tax of 530 per cent.—400 per cent. greater than any other British product has to stand in the home market. That is a matter which the Committee ought to take very seriously to heart.
What of the effect the restrictions at home may have upon our present export drive and our future exports of whisky? Whisky drinking is dying out.

Miss Jennie Lee: Hear, hear.

Mr. Duthie: The hon. Lady may say "hear, hear," but let us look at this from the purely economic point of view. It is a tragedy. The appreciation of quality is being lost; and any manufacturer knows that in order to maintain the standard of his goods in the export market he must have critical examination and estimation of his quality at home, otherwise it becomes only a name, and the value of that name goes down. There has in recent years been a tendency, following the lead of successive Governments, to increase the duties on imported whisky. There is still a considerable gap between the excessive Excise duties we impose in this country and those imposed abroad; they are still, on the average, twice as great here as abroad. But there is no reason in the world why those countries should not close the gap, and close it instantly. If they did, if they imposed on whisky an import duty comparable with the

Excise duty we impose at home, our whisky export business would be killed overnight.
When we ask for a decrease in duty we are asking for something like £2 13s. 4d. a gallon. That will not have such an enormous effect upon revenue returns. After all is said and done, the present amount of whisky which we are selling in the home market is 2¼ million gallons, and if only a small increase were permitted for the home market with a reduced duty the Treasury would not be the loser; but the industry would gain that fillip, that infusion of new lifeblood in home sales which is so vitally necessary for the future.
Many hon. Members may be asking themselves the age-old question: what is the relative value of barley as a feedingstuff compared with barley used for whisky manufacture. I will tell them. One ton of barley yields 105 gallons of proof whisky, which are available in the export field at £2 a gallon and produce £210. That amount of sterling or dollars can purchase 10 tons of wheat at present values.
Much has been said by the President of the Board of Trade and others on the Government Front Bench regarding the favourable treatment that was to be accorded to those industries which were showing the greatest success and endeavour in the export field. I claim that no industry has transcended the efforts and the success of Scottish distilleries in achieving results in the export market. In order to concentrate their available stocks on hard currency countries they have gladly and willingly at the request of the Chancellor, yielded up markets in soft currency countries which they enjoyed for generations. I submit that in common fairness, in return for their loss of those markets in soft currency countries, the Chancellor should use his power to give a quid pro quo by reducing the duty at home and giving an increased liberation of their stocks.
I sincerely hope, for the reasons my right hon. Friend and I have given, that the Chancellor will accept this new Clause. If he cannot go all the way, I appeal to him to let us have at least a token reduction. There has been a succession of increased imposts on this


industry for 55 years without a halt. This is a golden opportunity to put the tax machine in reverse, because already this industry has been burdened with the straw which breaks the camel's back. We cannot go further; we must go back if we are to save this industry. In giving us a concession, however small, the Chancellor would be halting that savage and, from our point of view, entirely suicidal onslaught on this industry, which is such an important national asset—a savage onslaught which I regret to say has been participated in by Chancellors of all parties.

5.0 p.m.

Lieut.-Commander Braithwaite: I understand, Major Milner, that you have ruled that while this new Clause deals specifically with whisky, it would be in Order to mention gin as well. Perhaps I might make reference to another new Clause on the Order Paper, which deals with the Spirit Duty as a whole.

The Chairman: For the information of the hon. and gallant Member, the Clause to which he has referred will be out of Order.

Lieut.-Commander Braithwaite: I was not aware of that, but I gather it is in Order to make some reference to gin on the new Clause which we are now discussing. Before I come to that, may I as a colleague, who sat in previous Parliaments with him, say how pleased I was to hear my right hon. Friend the Member for Moray and Nairn (Mr. J. Stuart), who for many years has confined his oratory to the refreshing suggestion, "That this House do now adjourn" or possibly under very extreme provocation to the Motion, "That the Question be now put."
I desire to support this new Clause not for the same reason as I supported the last, which was on humanitarian grounds, but purely on the grounds of the financial interests of this country. This, of course, is a hardy annual, which has been argued over and over again as the duty has steadily risen year by year, but the main arguments hold good still. There is, however, an additional one which is coming more and more into the picture as the present Government raises the duty. It is that of all people the Socialist Government are imposing a harsh policy of

price rationing on what are known as the members of the lower income groups by placing the consumption of whisky out of their reach. I remember when I was a great deal younger than I am now, watching the dockers in Glasgow going to work, and invariably they had a dram early in the morning. Those days have gone. Successive Governments have placed it out of their reach. It is a great pity that the very healthy beverage known as whisky has been priced right out of the reach of those whom we describe, for want of a better term, as the working classes.
At this particular moment in our affairs I am bound to say that while that argument is potent, infinitely more so is the argument advanced by my hon. Friend the Member for Banff (Mr. Duthie) as to the vital importance of whisky in our dollar earnings. The very grave matters which the Chancellor is endeavouring to grapple with at the present time are intimately bound up with this, and surely it is true to say that in proportion to the amount of labour involved in its production, whisky stands high, if not the highest of all, in our list of export industries.
The Financial Secretary may say, "Yes, all these things are true, but we are not raising the duty to consumers in foreign countries. This is merely a domestic proposal." May I submit to the right hon. Gentleman, whom I strongly suspect has hardened his heart in this matter or has had it hardened by his right hon. and learned Friend the Chancellor of the Exchequer, that wherever there has been a rise in the whisky duty here in the country of production it has almost invariably been followed by a similar increase abroad, in countries to which we have exported; so by this proposal of the Government's we are indirectly making it more difficult for our whisky to be consumed in foreign lands.
There is an argument which follows from that, and which I impress upon the right hon. Gentleman. We all know that in the United States, in particular, there has been an increase in the distillation of their own products, and one can say without any offensiveness whatsoever that those home-produced products of the United States are vastly inferior in quality to our Scotch whisky. The higher our prices are, the better is the opportunity


for the inferior whisky, and there is the danger of consumption in those foreign countries becoming more and more concentrated on the home and inferior product, so that one day a generation will rise that does not know and has not experienced the supreme quality of our Scotch whisky.

Mr. A. Edward Davies: Would the hon. Gentleman say how much Scotch whisky is available to America at the moment? He is talking about the high price, but we have constantly been told here that it is too low.

Lieut.-Commander Braithwaite: Does the hon. Gentleman want to know what is the price which is being charged?

Mr. Davies: The argument, as I understand the hon. and gallant Gentleman, is that if the price of our British product is too high, it will stimulate the production of American whisky, which he says is inferior. For the information of the House, will he kindly tell us what is the price paid for Scotch whisky in America now?

Lieut. - Commander Braithwaite: I speak subject to correction, but I understand that it is in the neighbourhood of eight dollars a bottle, which is very much lower than it is here at home.

Mr. Davies: What does the seller get? What does the producer get when it is sold?

Lieut.-Commander Braithwaite: I understand that it is in the vicinity of a dollar a bottle. I do not think that that affects the main argument which I was trying to make, and which I hope the Committee will not think is unfair. My argument was that if we attempt to raise the duty here at home, it has an effect in increasing the price abroad, and there is a danger of the home distilled whisky in those countries ousting the product which we are endeavouring to sell them at this particular moment.

Mr. Boothby: I think my hon. and gallant Friend should make it clear that when he mentions that prices will be raised abroad, it is because of an increase in import duty that those prices have to be increased.

Lieut.-Commander Braithwaite: I did say at the outset of my remarks that an

increase here was almost invariably followed by a balancing rise in those countries.
I regret that this form of price rationing has placed this product out of the reach of the lower income groups at home, but it is a greater pity that we are in the very greatest danger of striking a blow, in order to raise revenue at home, against our prime dollar earner, having regard to the labour employed, and one of the greatest weapons to our hands to enable us to get out of our present difficulties. Whatever instructions have been given to the Financial Secretary, I trust that, having listened to the arguments, he will meet us in the realisation that this is an important issue at the present time.

The Financial Secretary to the Treasury (Mr. Glenvil Hall): I should like to associate myself with the remarks of the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) in his reference to the speech of the right hon. Gentleman the Member for Moray and Nairn (Mr. J. Stuart). His speech was so charming and disarming and made with such lucidity that I had the utmost difficulty in restraining myself from jumping to my feet and offering everything he wanted. However, I fortunately restrained myself, and I have now to put before the Committee certain arguments which are conclusive as to why we on this side of the Committee cannot accept this new Clause.
What was said by the hon. Member for Banff (Mr. Duthie) is also true. A very high-powered deputation from the other side of the Committee waited upon us at the Treasury, and we had a very interesting exchange of views. I was sorry that I was not able to meet them in some small way. It is undoubtedly true that the duty on spirits is exceedingly high. It is £10 10s. 10d. per proof gallon, and if this Clause is accepted it would reduce it to £7 17s. 6d. The present duty on a bottle that is sold is £1 4s. 7d., and it is sold at £1 13s. 4d. If this new Clause were accepted, it would mean a reduction of the price by about 6s. 2½d. Even though that may seem a reasonable suggestion to make, the figures which I will give to the Committee in a few moments will show that the total is more than my right hon. and learned Friend can afford. The points made by hon.


Members include the one that the demand for Scotch whisky in the home market has declined during the past year. Reference has also been made to the fact that over a long period it was declining. The hon. and gallant Member for Holderness referred to this himself when he said that when he was young, and I gather living in Glasgow—

Lieut.-Commander Braithwaite: No, visiting.

Mr. Glenvil Hall: When he was visiting Glasgow he noticed that the ordinary working classes started the day with a tot or a dram. That is true, but the duty on whisky was somewhere in the neighbourhood of 2s. 6d. and 3s. 6d. a bottle, and it was available as a drink for the people known as the working classes. Whisky has now been put out of the range of the great mass of people, because of the duty and the price. It is also outside the range of people who normally one might suppose could afford it.
I do not think there is any ground for the suggestion that the reduced amount that now comes on the home market has been a handicap on the export trade. Whisky is one of our best exports, and that is one of the difficulties about it at the present time. The Ministry of Food have to see to it that in the releases for the home market there is enough left for the export market in order to earn dollars, which this country needs so badly now. It is one of the penalties which we have to pay in order to earn dollars, and whether we keep it at home or send it abroad it all goes.
5.15 p.m.
The whisky which comes into the home market is easily sold, as is the whisky which goes overseas. It is more important at the moment that it should go overseas, and we have to take that into account. The Ministry of Food have liberated more barley this year than previously in order to assist the catering for both the home and foreign markets. If the suggestion of the right hon. Gentleman the Member for Moray and Nairn were accepted and the reduction in the duty were limited purely to home-produced whisky, the cost would be about £6 million. The effect of the Clause would also be to reduce the duty on home-made gin as well, even if rum and brandy could be excluded, and if we

took that fact into account, the cost of the Clause would be in the neighbourhood of £15 million. If we went further and accepted the suggestion of the hon. and gallant Member for Holderness the cost would be in the neighbourhood of £20 million.
To sum up, the reply I would make to the Committee is that we see no signs at the moment that the fact that the home market has had to be restricted is having any effect on overseas sales or on the limited production—I admit that it is limited—in which the whisky distillers are able at the moment to engage. Even if my right hon. and learned Friend accepted the more modest suggestion of the right hon. Gentleman the Member for Moray and Nairn, it would cost £6 million. If we extended it as proposed, we would have to consider the distillers of gin, who are interested. If we made this concession for all home-produced spirits, it would cost £15 million. I think I have only to mention that figure to show that it is quite beyond our power to accept such a suggestion.

Mr. Duthie: Before the right hon. Gentleman sits down, may I put it to him that the effect on the export drive of a limited home sale is a long-term one? I admit what the right hon. Gentleman says about there being no immediate effect. However, a discriminating taste for whisky is being lost through the inability of the connoisseurs in the North to buy it, and we are thus losing the essential critical taste which gave our whisky its prestige abroad.

Mr. Godfrey Nicholson: I feel rather diffident about addressing the Committee on this subject as I am personally interested financially, being a gin distiller. I propose to approach the subject not from the point of view of any hardship from which the gin distiller may suffer, but simply from the point of view of revenue and leave it to the judgment of the Committee as to what conclusion they reach. I do not think it necessary to consider here whether the drinking of spirits is desirable or undesirable; we are here today to consider the tax purely from the point of view of yield.
I feel bound to warn the Treasury that my opinion is that they are tending to kill the goose that lays the golden egg. The right hon. Gentleman said that


acceptance of the new Clause would entail a loss in revenue of so many million pounds and therefore he could not even contemplate it. I tell him this, that the duty on spirits has risen to such a high level that he is in grave danger of not being able to maintain the existing revenue. The duty on spirits has been put up and up, and in time of boom and prosperity it has been possible to carry it, but with the decline in the purchasing power in the hands of the public, the duty tends to defeat its own ends and the yield will tend to dwindle.
To make a reductio ad absurdum, if the duty on spirits were £100 a bottle, nobody would buy spirits; if the duty were 1d. a bottle, there would be a heavy loss to the revenue, and many headaches. Somewhere between the two must lie a figure which will produce the optimum result from the point of view of the revenue, and that figure is not the same in time of boom and expansion as it is in time of depression or recession. I repeat that I am looking at this question merely from the point of view of the yield of revenue, as a taxpayer and as a Member of this Committee, and I repeat that the tax is too high from the point of view of the Treasury. How much it should be reduced I do not venture to say. I think it should come down at least 25 per cent. If we reduced the price of spirits by 1s. a bottle, we would not get much increased consumption but probably an actual loss in revenue. The duty should come down something in the nature of 25 per cent. I believe that we should then make up the loss of duty through increased consumption. We should then be better off than when we started.
I want to say a word in defence of my own trade. It may interest hon. Members to know that the duty on gin is 212s. 4d. per proof gallon and it is sold for 14s. per gallon. Therefore, the villain of the piece is not the distiller. I hope that the Treasury will consider my remarks, and that hon. Members will not think that I am pursuing my own private ends.

Mr. Stanley: I intervene not for the purpose of curtailing in any way this interesting Debate, but because I want to express my own particular difficulties and to point to the sort of arguments which I

want to hear. All of us feel that this is a matter which must be put not on the convenience, the comfort or the pleasure of individuals but on the economic basis. If we were merely considering the gratification of the whisky drinker or the gin drinker, we should have to weigh that against the gratification of the smoker or the man who goes in for football pools or other varieties of taxpayer.
There is an economic fact behind the Clause and the arguments of my hon. Friends. I can see that there might be excellent economic arguments for a reduction in the spirit duties, and I wonder if subsequent speakers will produce tax and figures to justify that conclusion. Clearly there would be an economic justification for a reduction of the duties if they were on the same basis as the Beer Duty which we have already considered; that is to say, that the duties were now so high that they were defeating their own ends and that a reduction in duty was the only way of arresting the decline in the revenue and, possibly, of increasing revenue. My hon. Friend the Member for Farnham (Mr. Nicholson), who speaks with great authority on this matter, referred to the effect of what he called the "Spirit Duty" on consumption. I wondered whether he was referring only to the effect the duty was having on the consumption of gin.

Mr. Nicholson: This is a very important question. With reference to the restricted allocation of whisky in the home market, I was not attempting to make out any case for whisky, but we are all hoping that one day whisky will be in increased supply on the home market. Then, I believe, precisely the same law of cause and effect will apply in the case of the consumption of whisky as in the case of gin. I do not think that we can separate gin and whisky; I call them both spirits. It is the high duty on spirits which will lead to such a fall in the consumption that the revenue will suffer.

Mr. Stanley: I thought my hon. Friend meant that and that he was devoting his argument not to whisky with which he started, but to the gin to which he was specifically referring. As I see it there is a difference at the moment between the two. We have not yet heard any facts or figures—perhaps we shall later on—to show that the consumption of


whisky is falling off as the result of this duty, but I believe that there are facts and figures which show quite clearly that the consumption of gin is falling off. Therefore, at any rate, it may well be that gin is coming in the same category as beer in the case of which a reduction of the duty is necessary if the revenue is to be maintained.
With regard to whisky, I should like to hear from hon. Members who can take advantage of the Debate some facts and figures on what appears to me to be the most important question of whether there is any evidence that the consumption of whisky is falling off as the result of this high duty so that we might say as an economic fact that a reduction of the duty would aid rather than hamper the revenue. So much for the economic effects inside the country.
Now for the question of the export trade. Apart from the rather long-distance matter to which one of my hon. Friends referred, I cannot see at the moment how the high internal duty is affecting the export trade. There again, it may be that hon. Members dealing with that aspect can show that in some way the price of whisky abroad is affected by the high duties which are being put on the sales at home. I agree that the point is an important one but it is a long-distance one. It may very well be that if we reduced the consumption of whisky in this country more and more, when export tends to fall off we may find that we have so small a home market that it will be unable to support an industry which will perhaps still be capable of a considerable export. That is important for the future but it is not an immediate matter at this crisis. I do not think that it has yet been argued that the reduction in duty would lead to some immediate increase in exports which, if it were so, would justify to me a reduction in the duty.
I have expressed to my hon. Friends my diffidence in this matter and mentioned some of the points I should like to have cleared up. As far as I can see, unless it can be shown that a reduction in the duty on spirits would prevent a fall in consumption and therefore a fall in revenue, or it can be shown that a reduction would lead to an increase in our all important exports, I should not feel justified in putting the claims of those consumers

above the claims of other consumers between whom we ought to judge if the money was available. Whatever hon. Members who hold strong views on this matter may feel, in those circumstances unless those two points are met, I could not support the Clause or advise my hon. Friends to do so.

Mr. Boothby: I am sorry that attendance at a Committee upstairs prevented me from having the opportunity and pleasure of listening to the speech of the right hon. Gentleman the Member for Moray and Nairn (Mr. J. Stuart). I have no doubt that he very quickly showed the Committee of what it had been deprived by his long occupancy of the Whips' Office. We are all happy to think that we are deprived of it no longer. I want to mention a question raised by my right hon. Friend the Member for West Bristol (Mr. Stanley) concerning the consumption in this country and the effect of the duty upon it. It is impossible to give a definite opinion on that for this reason. The arrangement which was come to two years ago between the Board of Trade, the Ministry of Food and the distillers was that the distillers undertook, in exchange for getting the barley that they required to start the industry up again after the war, to export 75 per cent. of the total production to the dollar area, leaving only 25 per cent. of the total production of whisky—and that included stocks—for the home market.
5.30 p.m.
The result has been that the home market has been deprived of good whisky to a fantastic extent during the last two years. Therefore, in my submission, there is not enough whisky available here to test the home market. The trouble about whisky today is not only that it is far too expensive, but that it is almost unobtainable unless one pays a fantastic price. All I know is that the home consumption of whisky is small, and in the long run that will be bad for the industry because it is only a question of time before the people of this country will lose their taste for it. In fact, it is true to say that the young generation are losing their taste for whisky, if they have not lost it already, and that is a pity because it is a good drink and not an unhealthy drink. The position is


different with regard to gin because there has never been a quantitative limitation on that spirit. The consumption of gin is falling, and one can get plenty of gin in any grocer's shop today at the fixed price. Therefore it is a fair test to take the fall in gin but not in whisky.
That brings me to another point made by the hon. Member for Farnham (Mr. Nicholson). It is true that under the new doctrine of taxation inculcated by the late Lord Keynes, tax should be high in times of boom, especially on luxuries, and that it should be reduced with the approach of a depression and lowered pretty sharply when the depression arrives. By "depression" I mean a recession, because I am not talking of a major slump. However, there is no question that we are leaving the sellers' market and entering the buyers' market, and accordingly there is less money about. That in itself is an argument for a remission of this Duty.
The Financial Secretary admitted that the taxation on whisky at present is penal. The right hon. Gentleman said that not only does it put whisky out of the range of the working classes but out of the range of the well-to-do classes as well. That cannot go on indefinitely because, if it does, we shall lose the home market. The right hon. Gentleman said that whisky is a popular drink. I think it has been, but I am certain that it will not remain a popular drink if it is unobtainable either through lack of its existence in this country or through this penal taxation which raises the price to a point at which ordinary people will not be prepared to buy it.
Whisky remains our greatest single dollar earner per unit of labour, and dollars are, as we are repeatedly reminded by the Treasury, absolutely vital to this country at present. I say that if we want to keep it as a good dollar earner, as surely we do, we must take some steps to revive a home market. An export trade can never be conducted without a home market because it is subject to violent fluctuations and, with no home market to fall back upon, there is not sufficient stability for the export trade. Nor, as the hon. Member for Banff (Mr. Duthie) rightly said, have we the connoisseurs who can tell the difference between good whisky and bad. I am absolutely convinced that the definite

continuation of this scale of duty will kill the whisky industry, and that would be a disaster for Scotland and a disaster for our dollar trade.

Mr. Birch: I shall revert to a few remarks made by my right hon. Friend the Member for West Bristol (Mr. Stanley) who drew a distinction between whisky and gin. There I think my right hon. Friend was right, because the question of whisky is complicated by that of dollar exports. His main point was that what we have to look at in this Committee is the effect upon the revenue of anything we may do about these duties. He also called for figures from those concerned in this matter. The trouble about the figures which are published in the "Statistical Digest" is that they relate to the consumption of spirits and do not give whisky and gin separately. However, such figures as have been published are extremely significant.
The monthly consumption of proof gallons in 1938 was 860,000. For the first three months of 1948 the consumption averaged rather over 800,000 gallons, and in March, 1948, it was 870,000 gallons. Therefore, by the first quarter of last year there had not been a heavy reduction in the consumption of spirits in this country. The figures for the first quarter of this year are quite different. In January the consumption was 700,000 gallons, not a large fall. In February it was 490,000 gallons, and in March it was 380,000 gallons. Therefore, by March this year the consumption of spirits was appreciably less than half of what it was last year.
As I understand it, the consumption of gin in this country last year is higher than the consumption of whisky and as there has not been any great decrease in the consumption of whisky here because of shortage of supply, then presumably the decrease in the consumption of gin must have been much more than 50 per cent. In fact the figures indicate that the consumption of gin is running something like one-third of what it was last year. When the wine duty was reduced, we were told specifically that the object was to preserve the Revenue. When the beer duty was reduced, we were told specifically that the object was to reduce the cost of living, but I do not think we were meant to take that seriously, and I take it


that in that case too the object was to preserve the Revenue.
The right hon. Gentleman said that if the duty on home spirits were reduced it would cost the Revenue £15 million. I think we are entitled to know on what assumptions of consumption that figure was based. If I am right in supposing that the consumption of spirits will go on declining as it has done in the first quarter of this year, there will be an enormous reduction in the revenue raised from spirits in this country. If that happens, a serious situation will face the Government because this is one of our major revenue earners. We might be entitled to ask right hon. and hon. Gentlemen opposite a question which they always ask us—if they do not raise the revenue from spirits, where will they find it? Looking at these figures, I do not believe that they will raise in the current year from spirits anything like the amount raised last year. If the remedy in the case of wine and beer was to reduce the duty, that must be the remedy also in the case of spirits.
If we are not to press this new Clause, we should have from the Government a statement showing on what the £15 million is based, and what are their assumptions about consumption for the rest of this year. It looks to me as if they are simply assuming that consumption will be the same and that on that basis the cost would be £15 million. My guess is that the cost to the Revenue of going on as we are now will be much greater than that, and if some reduction were made in the duty, the cost would probably be a great deal less.

Brigadier Peto: By a curious coincidence I was entertained at Lords today by a firm of distillers, and I asked them various questions on this topic. I must tell the Committee that they had no idea I was a Member of Parliament. I was introduced quite casually and I asked whether or not sales had gone down in their public houses throughout the country during the past six months. The gentleman speaking to me said that not only had sales gone down but that the Chancellor will be sharply surprised when he finds he will get at least 30 per cent. less than he expects to get from this duty.

Mr. Stanley: Which spirit?

Brigadier Peto: Whisky. He added, "It really makes me laugh when I see all the fuss that is made throughout the country about Purchase Tax at the rate of 33⅓ per cent., or whatever it may be, for here are we taxed at the rate of 530 per cent."

Mr. W. R. Williams: Will the hon. and gallant Gentleman say how many bottles of whisky were going spare on the shelves of those public houses?

Brigadier Peto: No, I could not tell the hon. Gentleman that. What that gentleman felt keenly, and what I feel keenly, is that the tax on this commodity is prohibitive at 530 per cent. above its cost. I heartily support my right hon. Friend the Member for Moray and Nairn (Mr. J. Stuart) who moved this new Clause for some readjustment of the tax in the future to allow the home market to benefit by knowing what good whisky tastes like. At the present moment it is completely denied the opportunity of distinguishing between good or bad whisky because there is none available.

The Deputy-Chairman: Mr. Hugh Fraser.

Mr. Beverley Baxter: I want to ask a question—

The Deputy-Chairman: The hon. Gentleman can make his speech in a few minutes? I have already called on Mr. Fraser.

Mr. Baxter: I wanted to ask a question.

Mr. H. Fraser: I should like to add a few figures to try to convince my right hon. Friend the Member for West Bristol (Mr. Stanley) who seems not absolutely convinced. I do not want to have a border foray with the house of Stanley, but Scottish Members feel strongly about this and I think they feel rightly so because their intuition, their touch of Celtic inspiration, is borne out by the figures produced by my hon. Friend the Member for Flint (Mr. Birch). I would draw the attention of the Financial Secretary to some of these overall figures of whisky consumption. In 1900, when I must say that the Republic of Ireland was included, whisky consumption was 38 million proof gallons in this country.


In 1948 the consumption was just over five million proof gallons. There is no doubt that in 1900 whisky came into the cost-of-living index. It is undoubtedly one of the tragedies which Scotsmen on both sides of the Committee mourn, that no longer is whisky the drink of the British people as it was in the past.
5.45 p.m.
I would point out that in 1900 duty was 11s. per proof gallon. We went through various epochs and in 1940, when the duty was at 97s. per proof gallon, the consumption was about 9 million gallons. Since then, of course, as the hon. Member for East Aberdeen (Mr. Boothby) pointed out, there have been difficulties about the quantity of barley available. In 1947 and 1948—as far as the distillation carried out in 1940 and 1941 is concerned—approximately the same amount of barley was available, although, as hon. Members will know, there obviously was not the same amount of barley for several years before. The amount of whisky available to the market in 1947 and 1948 was approximately the same, but the actual consumption in 1947, when the tax was 190s. per proof gallon, was just under 7 million gallons; in 1948, when the tax was 210s. per proof gallon, the consumption—this is of whisky alone—was just over 5 million gallons, a drop of approximately 2 million gallons, which has put the Treasury out of pocket by several hundred thousands of pounds.

Mr. Baxter: I want to ask somebody a question; perhaps I may ask my hon. Friend. I find myself in great sympathy with the various whisky Members who are putting the case for Scotland, but I should like to ask this question. We are constantly being told that the consumption of whisky in this country is dropping, and it is a very harrowing and disturbing story. Why is it so difficult to get whisky? I have an order with my local provider for a bottle a week. I cannot get a bottle a week. Every now and then I get half a bottle, and sometimes none. Will some of the Scottish Members explain this mystery?

Mr. Boothby: I explained it just now but the hon. Gentleman was not here.

Mr. Fraser: No doubt that mystery will be explained to the hon. Gentleman

later on. I want to pursue my argument into the question of returns to the Revenue. There is absolutely no question that at present the tax gatherers are losing money on this form of taxation. Beyond that, there is absolutely no question that if the weight of taxation on this product remains at the present height, and when, as has been pointed out on this side, there is £900 tax on every acre of barley which is distilled, it will undoubtedly lead—if we start going a bit more groggy economically than at present, which we look like doing—to a growing up, as I hope it will, of a series of stills in the Highlands. It is inevitable, if this penal taxation continues, that if people want the stuff they will get it. What my hon. Friend has rightly said, is that the thing which is being destroyed is the taste of whisky. We are having all sorts of bogus brews—dews of this and mists of that—being put on the market, and I can only suggest that if the Government do not accept the Clause a new one should be christened, called "The mist of Glenvil Hall."

Mr. Spearman: My right hon. Friend the Member for Moray and Nairn (Mr. J. Stuart), who raised this matter, made an admirable speech. We on this side can be gratified at its reception, but we can hardly be satisfied with the response from the Financial Secretary, for he seemed to give no concessions and to hold out not even a promise that he would consider this matter or give any cogent reasons for his refusal. All the arguments in the Debate have, quite rightly, turned not on the hardship to the producer or the consumer, but entirely on the question of the revenue. The Financial Secretary would agree that it is possible to raise taxation so high that it produces diminishing returns. In fact, the Chancellor admitted that when making his reduction in the tax on wines in his Budget.
I should like the Financial Secretary to tell us, first, whether the Government, in their decision to maintain this very high rate of taxation, are guided entirely by the belief that that will produce more revenue. If so, how can the right hon. Gentleman answer the arguments put forward by, amongst others, my hon. Friend the Member for Flint (Mr. Birch), who


explained so clearly how revenue was falling on spirits generally, and the arguments of my hon. Friend the Member for East Aberdeen (Mr. Boothby), who suggested that this very valuable revenue producer would be endangered in the future through a lessening of the taste for whisky? The second point I want to ask the Financial Secretary is whether this is entirely a question of revenue, or whether he and his colleagues are governed by the fact that they think they know better than the public the things upon which the public ought to spend their money. If so, what does he think are their qualifications for being the judges in that matter?

Mr. Glenvil Hall: Perhaps I might reply briefly to the main points made in this discussion. I have admitted, and the hon. Member for East Aberdeen (Mr. Boothby) has underlined it since, that the duty on whisky is very high. No doubt there are some people who do not drink it, even if they could get it, because the duty is so high. The fear has been expressed that people will lose their taste for whisky. That may be so, but it applies equally to tobacco. The manufacturers of tobacco are equally fearful—[HON. MEMBERS: "We do not export tobacco"]—that the rising generation will not smoke because of the cost of cigarettes and that, therefore, presently that industry will decline and with it, of course, the revenue which the Government now obtain from the sale of tobacco.

Mr. Fraser: Surely, the right hon. Gentleman would agree that that hardly applies in the same way to the manufacture of whisky inside this country and the re-export of a certain amount of tobacco from this country.

Mr. Glenvil Hall: All I was about to say was that those factors may or may not be true. The point is, should any Chancellor of the Exchequer, to whatever party he might belong, at this juncture take those facts into account, and do they override the other factors which I endeavoured briefly to put before the Committee when I spoke earlier? To begin with, he must remember that barley, one of the ingredients in the manufacture of whisky, can also be sold, and is needed, elsewhere. Therefore, the amount of barley available is not unlimited. The

second point is that we have to consider exports. The hon. Member for East Aberdeen reminded us that whisky is one of our best exports. When we take the number of men employed in this industry and the amount earned by the exports, the export value of a bottle of whisky is tremendous, both in North and in South America and elsewhere, where we want, if we can, to earn hard currency. Thirdly, we must take into account the Revenue.
The Chancellor has to take all those things into account and to balance them. My right hon. and learned Friend has done that and he feels that, as the taxation on whisky does not affect exports; that, as it is essential that the great bulk of what is made now should go abroad, therefore the fact that the duty is as high as it is does not really affect the position at this juncture. It may well be that as the years go by, when things become normal, the Chancellor of the Exchequer of the day may want to pay much more attention to the home market, if he is seeking revenue, than the present Chancellor can afford to do, because he is after exports and must also think of the barley that is consumed.
In reply to the question by the hon. Member for Flint (Mr. Birch), I think he must have got his figures from the Statistical Digest.

Mr. Birch: Mr. Birch indicated assent.

Mr. Glenvil Hall: What, I think, he overlooked—I am not complaining about this—is that a Budget was to be opened in April; and that although normally the figures for clearances from bond are a very good guide to consumption, they cannot be considered a good guide just then, particularly for the first three months of the year, because, quite obviously, those who had whisky in bond were not clearing it because they had no notion of what changes might be made in the Budget.

Mr. Birch: That is not a very valid argument, because the figures show that for 1948 the consumption in January was 800,000 proof gallons, and went up in March to 870,000; whereas, in this year, it went down from 700,000 in January to 380,000 proof gallons in March. The same considerations, surely, applied in both years; in each of them a Budget was to be presented.

Mr. Glenvil Hall: For this year, for some reason into which I will not go now, there were great hopes by the public—people were misinformed; hopes were expressed in newspapers and elsewhere—that as last year ended with a substantial surplus, relief of taxation could be hoped for on, perhaps, both drink and tobacco. Although I make the point for no more than it is worth, I can tell the hon. Gentleman that, for the reasons I have given, the figures for the first quarter of this year are not entirely to be relied upon.
The chief proof—the point has already been made and I do not want to labour it—is that whisky is almost unobtainable; every bottle that is produced is sold. I think it was the hon. and gallant Member for Barnstaple (Brigadier Peto) who said that whisky distillers had indicated to him that the consumption in this country was going down. From our Revenue returns, however, we have no figures to show that that is so. On the contrary, our figures show that the Revenue in this matter is—I hesitate to use the word—buoyant; that all the whisky that can be put on the home market is snapped up. [HON. MEMBERS: "Of course it is."] There is a conflict, therefore, between what the hon. and

gallant Gentleman has told us and my information; but I can tell him that we are relying on actual figures and also the evidence of our own senses.

Mr. Birch: Can the right hon. Gentleman give us any comparative figures for the period since the Budget? We have already been given the figures for beer consumption in April and, possibly, in May. After people found out that the duties on spirits were not being reduced—after all, the Budget was as long ago as 6th April—did they all drink the Chancellor's health and did consumption go up on last year, or did the downward tendency still continue? This information is very material.

Mr. C. Williams: The right hon. Gentleman, surely, will now answer that important question and—

The Parliamentary Secretary to the Treasury (Mr. William Whiteley): The Parliamentary Secretary to the Treasury (Mr. William Whiteley) rose in his place and claimed to move,"That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 263; Noes, 135.

Division No. 183.]
AYES
[6.0 p.m.


Acland, Sir Richard
Champion, A. J.
Field, Capt. W. J.


Adams, Richard (Balham)
Chetwynd, G. R.
Follick, M.


Albu, A. H.
Cluse, W. S.
Foot, M. M.


Allen, A. C. (Bosworth)
Cobb, F. A.
Forman, J. C.


Anderson, A. (Motherwell)
Cocks, F. S.
Fraser, T. (Hamilton)


Attewell, H. C.
Collick, P.
Freeman, Peter (Newport)


Austin, H. Lewis
Collindridge, F.
Gallacher, W.


Awbery, S. S.
Collins, V. J.
Ganley, Mrs. C. S.


Ayles, W. H.
Colman, Miss G. M.
Gibbins, J.


Ayrton Gould, Mrs. B.
Cook, T. F.
Gilzean, A.


Bacon, Miss A.
Cooper, G.
Glanville, J. E. (Consett)


Balfour, A.
Corlett, Dr. J.
Grenfell, D. R.


Barstow, P. G.
Crawley, A.
Grey, C. F.


Barton, C.
Crossman, R. H. S.
Grierson, E.


Battley, J. R.
Daggar, G.
Griffiths, D. (Rother Valley)


Bechervaise, A. E.
Daines, P.
Griffiths, W. D. (Moss Side)


Benson, G.
Davies, Edward (Burslem)
Gruffydd, Prof. W. J.


Beswick, F.
Davies, Ernest (Enfield)
Guest, Dr. L. Haden


Bevan, Rt. Hon. A. (Ebbw Vale)
Davies, Harold (Leek)
Gunter, R. J.


Binns, J.
Davies, R. J. (Westhoughton)
Haire, John E. (Wycombe)


Blackburn, A. R.
Davies, S. O. (Merthyr)
Hale, Leslie


Blenkinsop, A.
Deer, G.
Hall, Rt. Hon. Glenvil


Blyton, W. R.
Delargy, H. J.
Hamilton, Lieut.-Col. R.


Bowden, Fig. Offr. H. W.
Diamond, J.
Hardy, E. A.


Braddock, Mrs. E. M. (L'pl, Exch'ge)
Dobbie, W.
Haworth, J.


Braddock, T. (Mitcham)
Dodds, N. N.
Herbison, Miss M.


Brook, D. (Halifax)
Driberg, T. E. N.
Hewitson, Capt. W.


Brooks, T. J. (Rothwell)
Dye, S.
Hobson, C. R.


Broughton, Dr. A. D. D.
Ede, Rt. Hon. J. C.
Holman, P.


Brown, T. J. (Ince)
Edelman, M.
Holmes, H. E. (Hemsworth)


Brown, W. J. (Rugby)
Evans, Albert (Islington, W.)
Horabin, T. L.


Bruce, Maj. D. W. T.
Evans, E. (Lowestoft)
Houghton, A. L. N. D. (Sowerby)


Burden, T. W.
Evans, John (Ogmore)
Hoy, J.


Burke, W. A.
Evans, S. N. (Wednesbury)
Hubbard, T.


Butler, H. W. (Hackney, S.)
Ewart, R.
Hudson, J. H. (Ealing, W.)


Callaghan, James
Fairhurst, F.
Hughes, Emrys (S. Ayr)


Carmichael, James
Farthing, W. J.
Hughes, Hector (Aberdeen, N.)


Castle, Mrs. B. A.
Fernyhough, E.
Hughes, H. D. (W'lverh'ton, W.)




Hutchinson, H. L. (Rusholme)
Mort, D. L.
Sparks, J. A.


Hynd, H. (Hackney, C.)
Moyle, A.
Stewart, Michael (Fulham, E.)


Hynd, J. B. (Attercliffe)
Murray, J. D.
Stross, Dr. B.


Irvine, A. J. (Liverpool)
Nally, W.
Stubbs, A. E.


Irving, W. J. (Tottenham, N.)
Naylor, T. E.
Summerskill, Rt. Hon. Edith


Jay, D. P. T.
Neal, H. (Claycross)
Swingler, S.


Jeger, G. (Winchester)
Nichol, Mrs. M. E. (Bradford, N.)
Sylvester, G. O.


Jenkins, R. H.
Noel-Baker, Capt. F. E. (Brentford)
Symonds, A. L.


John, W.
Noel-Buxton, Lady
Taylor, R. J. (Morpeth)


Jones, D. T. (Hartlepool)
Oldfield, W. H.
Taylor, Dr. S. (Barnet)


Jones, J. H. (Bolton)
Oliver, G. H.
Thomas, D. E. (Aberdare)


Keenan, W.
Orbach, M.
Thomas, George (Cardiff)


Key, Rt. Hon. C. W.
Paling, Will T. (Dewsbury)
Thomas, Ivor (Keighley)


Kinghorn, Sqn.-Ldr. E.
Palmer, A. M. F.
Thomas, John R. (Dover)


Kinley, J.
Parker, J.
Thorneycroft, Harry (Clayton)


Kirby, B. V.
Paton, Mrs. F. (Rushcliffe)
Thurtle, Ernest


Lang, G.
Paton, J. (Norwich)
Titterington, M. F.


Lavers, S.
Pearson, A.
Tolley, L.


Lawson, Rt. Hon. J. J.
Peart, T. F.
Tomlinson, Rt. Hon. G.


Lee, F. (Hulme)
Piratin, P.
Turner-Samuels, M.


Lee, Miss J. (Cannock)
Poole, Cecil (Lichfield)
Ungoed-Thomas, L.


Leonard, W.
Popplewell, E.
Usborne, Henry


Levy, B. W.
Porter, E. (Warrington)
Viant, S. P.


Lewis, T. (Southampton)
Porter, G. (Leeds)
Walker, G. H.


Lipton, Lt.-Col. M.
Price, M. Philips
Wallace, G. D. (Chislehurst)


Logan, D. G.
Pryde, D. J.
Warbey, W. N.


Longden, F.
Pursey, Comdr. H.
Watkins, T. E.


Lyne, A. W.
Randall, H. E.
Webb, M. (Bradford, C.)


McAdam, W.
Ranger, J.
Wells, P. L. (Faversham)


McAllister, G.
Rankin, J.
West, D. G.


McEntee, V. La. T.
Reid, T. (Swindon)
Wheatley, Rt. Hon. John (Edinb'gh, E.)


McGhee, H. G.
Ridealgh, Mrs. M.
White, H. (Derbyshire, N. E.)


McGovern, J.
Roberts, Goronwy (Caernarvonshire)
Whiteley, Rt. Hon. W.


Mack, J. D.
Robertson, J. J. (Berwick)
Wilkes, L.


McKay, J. (Wallsend)
Robinson, Kenneth (St. Pancras, N.)
Wilkins, W. A.


Mackay, R. W. G. (Hull, N. W.)
Rogers, G. H. R.
Williams, D. J. (Neath)


McKinlay, A. S.
Ross, William (Kilmarnock)
Williams, J. L. (Kelvingrove)


McLeavy, F.
Royle, C.
Williams, Ronald (Wigan)


MacPherson, Malcolm (Stirling)
Scollan, T.
Williams, Rt. Hon. T. (Don Valley)


Mainwaring, W. H.
Scott-Elliot, W.
Williams, W. T. (Hammersmith, S.)


Mallalieu, J. P. W. (Huddersfield)
Segal, Dr. S.
Williams, W. R. (Heston)


Mann, Mrs. J.
Shackleton, E. A. A.
Willis, E.


Mathers, Rt. Hon. George
Sharp, Granville
Wills, Mrs. E. A.


Mellish, R. J.
Shinwell, Rt. Hon. E.
Woodburn, Rt. Hon. A.


Messer, F.
Shurmer, P.
Wyatt, W.


Middleton, Mrs. L.
Silverman, J. (Erdington)
Yates, V. F.


Mikardo, Ian.
Silverman, S. S. (Nelson)
Younger, Hon. Kenneth


Millington, Wing-Comdr. E. R.
Simmons, G. J.



Monslow, W.
Skeffington-Lodge, T. C.
TELLERS FOR THE AYES:


Morley, R.
Skinnard, F. W.
Mr. Joseph Henderson and


Morris, Lt.-Col. H. (Sheffield, C.)
Smith, S. H. (Hull, S. W.)
Mr. Hannan.


Morris, P. (Swansea, W.)
Soskice, Rt. Hon. Sir Frank





NOES


Agnew, Cmdr. P. G.
Elliot, Lieut.-Col. Rt. Hon. Walter
Joynson-Hicks, Hon. L. W.


Amory, D. Heathcoat
Fletcher, W. (Bury)
Kendall, W. D.


Assheton, Rt. Hon. R.
Fox, Sir G.
Kerr, Sir J. Graham


Astor, Hon. M.
Fraser, H. C. P. (Stone)
Lancaster, Col. C. G.


Baldwin, A. E.
Fraser, Sir I. (Lonsdale)
Langford-Holt, J.


Baxter, A. B.
Galbraith, Cmdr. T. D. (Pollok)
Legge-Bourke, Maj. E. A. H.


Beamish, Maj. T. V. H.
Galbraith, T. G. D. (Hillhead)
Lennox-Boyd, A. T.


Birch, Nigel
Gammans, L. D.
Lindsay, M. (Solihull)


Boles, Lt.-Col. D. C. (Wells)
Gates, Maj. E. E.
Linstead, H. N.


Boothby, R.
George, Lady M. Lloyd (Anglesey)
Lloyd, Maj Guy (Renfrew, E.)


Bower, N.
Gomme-Duncan, Col. A.
Lloyd, Selwyn (Wirral)


Boyd-Carpenter, J. A.
Grimston, R. V.
Low, A. R. W.


Bracken, Rt. Hon. Brendan
Hannon, Sir P. (Moseley)
Lucas-Tooth, Sir H.


Braithwaite, Lt.-Comdr. J. G.
Harden, J. R. E.
MacAndrew, Col. Sir C.


Buchan-Hepburn, P. G. T.
Hare, Hon. J. H. (Woodbridge)
McCorquodale, Rt. Hon. M. S.


Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)
Harris, F. W. (Croydon, N.)
Macdonald, Sir P. (I. of Wight)


Challen, C.
Harris, H. Wilson (Cambridge Univ.)
McFarlane, C. S.


Channon, H.
Harvey, Air-Comdre. A. V.
Mackeson, Brig. H. R.


Clifton-Brown, Lt.-Col. G.
Haughton, S. G.
McKie, J. H. (Galloway)


Crookshank, Capt. Rt. Hon. H. F. C.
Headlam, Lieut.-Col. Rt. Hon. Sir C.
Maclean, F. H. R. (Lancaster)


Crosthwaite-Eyre, Col. O. E.
Hinchingbrooke, Viscount
MacLeod, J.


Cuthbert, W. N.
Hogg, Hon. Q.
Macmillan, Rt. Hn. Harold (Bromley)


Darling, Sir W. Y.
Hollis, M. C.
Macpherson, N. (Dumfries)


De la Bère, R.
Hope, Lord J.
Maitland, Comdr. J. W.


Dodds-Parker, A. D.
Howard, Hon. A.
Manningham-Buller, R. E.


Drewe, C.
Hurd, A.
Marlowe, A A. H.


Dugdale, Maj. Sir T. (Richmond)
Hutchison, Lt.-Cm. Clark (E'b'rgh W.)
Mellor, Sir J.


Duthie, W. S.
Hutchison, Col. J. R. (Glasgow, C.)
Morris, Hopkin (Carmarthen)


Eccles, D. M.
Jeffreys, General Sir G.
Morris-Jones, Sir H.







Morrison, Rt. Hon. W. S. (Cirencester)
Roberts, Emrys (Merioneth)
Thorneycroft, G. E. P. (Monmouth)


Neven-Spence, Sir B.
Robertson, Sir D. (Streatham)
Thornton-Kemsley, C. N.


Nicholson, G.
Robinson, Roland (Blackpool, S.)
Thorp, Brigadier R. A. F.


Odey, G. W.
Savory, Prof. D. L.
Touche, G. C.


O'Neill, Rt. Hon. Sir H.
Scott, Lord W.
Turton, R. H.


Osborne, C.
Shephard, S. (Newark)
Tweedsmuir, Lady


Peake, Rt. Hon. O.
Snadden, W. M.
Wadsworth, G.


Peto, Brig. C. H. M.
Spearman, A. C. M.
Wakefield, Sir W. W.


Pickthorn, K.
Stanley, Rt Hon. O.
Walker-Smith, D.


Ponsonby, Col. C. E.
Stewart, J. Henderson (Fife, E.)
Ward, Hon. G. R.


Poole, O. B. S. (Oswestry)
Strauss, Henry (English Universities)
Wheatley, Colonel M. J. (Dorset, E.)


Prior-Palmer, Brig. O.
Stuart, Rt. Hon. J. (Moray)
Williams, C. (Torquay)


Raikes, H. V.
Studholme, H. G.
Williams, Gerald (Tonbridge)


Ramsay, Maj. S.
Sutcliffe, H.
York, C.


Rayner, Brig. R.
Taylor, C. S. (Eastbourne)



Reed, Sir S. (Aylesbury)
Taylor, Vice-Adm. E. A. (P'dd't'n, S.)
TELLERS FOR THE NOES:


Renton, D.
Teeling, William
Major Conant and




Mr. Wingfield Digby.

Question put accordingly, "That the Clause be read a Second time."

The Committee divided: Ayes, 102; Noes, 275.

Division No. 184.]
AYES
[6.10 p.m.


Assheton, Rt. Hon. R.
Headlam Lieut.-Col. Rt. Hon. Sir C.
O'Neill, Rt. Hon. Sir H.


Astor, Hon. M.
Hollis, M. C.
Peto, Brig. C. H. M.


Baldwin, A. E.
Howard, Hon. A.
Poole, O. B. S. (Oswestry)


Beamish, Maj. T. V. H.
Hudson, Rt. Hon. R. S. (Southport)
Price-White, Lt-Col. D.


Boles, Lt.-Col. D. C. (Wells)
Hurd, A.
Prior-Palmer, Brig. O.


Boothby, R.
Hutchison, Lt.-Cm. Clark (E'b'rgh W.)
Ramsay, Maj. S.


Bower, N.
Hutchison, Col. J. R. (Glasgow, C.)
Rayner, Brig. R.


Boyd-Carpenter, J. A.
Jeffreys, General Sir G.
Reed, Sir S. (Aylesbury)


Brown, W. J. (Rugby)
Joynson-Hicks, Hon. L. W.
Robertson, Sir D. (Streatham)


Channon, H.
Kerr, Sir J. Graham
Robinson, Roland (Blackpool, S.)


Clarke, Col. R. S.
Langford-Holt, J.
Scott, Lord W.


Clifton-Brown, Lt.-Col. G.
Legge-Bourke, Maj. E. A. H.
Snadden, W. M.


Conant, Maj. R. J. E.
Lindsay, M. (Solihull)
Stewart, J. Henderson (Fife, E.)


Cooper-Key, E. M.
Linstead, H. N.
Strauss, Henry (English Universities)


Corbett, Lieut.-Col. U. (Ludlow)
Lloyd, Maj Guy (Renfrew, E.)
Stuart, Rt. Hon. J. (Moray)


Cuthbert, W. N.
Lloyd, Selwyn (Wirral)
Studholme, H. G.


Darling, Sir W. Y.
Low, A. R. W.
Sutcliffe, H.


De la Bère, R.
Lucas-Tooth, Sir H.
Taylor, C. S. (Eastbourne)


Digby, Simon Wingfield
MacAndrew, Col. Sir C.
Taylor, Vice-Adm, E. A. (P'dd't'n, S.)


Drewe, C.
McCorquodale, Rt. Hon. M. S.
Teeling, William


Dugdale, Maj. Sir T. (Richmond)
McFarlane, C. S.
Thorneycroft, G. E. P. (Monmouth)


Elliot, Lieut-Col. Rt. Hon. Walter
Mackeson, Brig. H. R.
Thornton-Kemsley, C. N.


Foster, J. G. (Northwich)
McKie, J. H. (Galloway)
Thorp, Brigadier R. A. F.


Fox, Sir G.
Maclean, F. H. R. (Lancaster)
Touche, G. C.


Fraser, H. C. P. (Stone)
MacLeod, J.
Tweedsmuir, Lady


Fraser, Sir I. (Lonsdale)
Macmillan, Rt. Hn. Harold (Bromley)
Wakefield, Sir W. W.


Galbraith, Cmdr. T. D. (Pollok)
Macpherson, N. (Dumfries)
Walker-Smith, D.


Galbraith, T. G. D. (Hillhead)
Marlowe, A. A. H.
Ward, Hon. G. R.


Gates, Maj. E. E.
Marples, A. E.
Wheatley, Colonel M. J. (Dorset, E.)


Gomme-Duncan, Col. A.
Maude, J. C.
Williams, C. (Torquay)


Grimston, R. V.
Mellor, Sir J.
Williams, Gerald (Tonbridge)


Harden, J. R. E.
Morrison, Rt. Hon. W. S. (Cirencester)
York, C.


Hare, Hon. J. H. (Woodbridge)
Mott-Radclyffe, C. E.



Harris, F. W. (Croydon, N.)
Neven-Spence, Sir B.
TELLERS FOR THE AYES:


Harvey, Air-Comdre. A. V.
Odey, G. W.
Lieut-Commander Braithwaite and




Mr. Duthie.




NOES


Acland, Sir Richard
Binns, J.
Chetwynd, G. R.


Adams, Richard (Balham)
Blackburn, A. R.
Cluse, W. S.


Albu, A. H.
Blenkinsop, A.
Cobb, F. A.


Allen, A. C. (Bosworth)
Blyton, W. R.
Cocks, F. S.


Alpass, J. H.
Bowden, Fig. Offr. H. W.
Collick, P.


Anderson, A. (Motherwell)
Braddock, Mrs. E. M. (L'pl. Exch'ge)
Collindridge, F.


Attewell, H. C.
Braddock, T. (Mitcham)
Collins, V. J.


Austin, H. Lewis
Bramall, E. A.
Colman, Miss G. M.


Awbery, S. S.
Brook, D. (Halifax)
Cook, T. F.


Ayles, W. H.
Brooks, T. J. (Rothwell)
Cooper, G.


Ayrton Gould, Mrs. B.
Broughton, Dr. A. D. D.
Corlett, Dr. J.


Bacon, Miss A.
Brown, T. J. (Ince)
Crawley, A.


Balfour, A.
Bruce, Maj. D. W. T.
Crossman, R. H. S.


Barstow, P. G.
Burden, T. W.
Daggar, G.


Barton, C.
Burke, W. A.
Daines, P.


Battley, J. R.
Butler, H. W. (Hackney, S.)
Davies, Edward (Burslem)


Bechervaise, A. E.
Callaghan, James
Davies, Ernest (Enfield)


Benson, G.
Carmichael, James
Davies, Harold (Leek)


Beswick, F.
Castle, Mrs. B. A.
Davies, R. J. (Westhoughton)


Bevan, Rt. Hon. A. (Ebbw Vale)
Champion, A. J.
Davies, S. O. (Merthyr)




Deer, G.
Lang, G.
Ridealgh, Mrs. M.


Delargy, H. J.
Lavers, S.
Roberts, Emrys (Merioneth)


Diamond, J.
Lawson, Rt. Hon. J. J.
Roberts, Goronwy (Caernarvonshire)


Dobbie, W.
Lee, F. (Hulme)
Roberts, W. (Cumberland, N.)


Dodds, N. N.
Lee, Miss J. (Cannock)
Robertson, J. J. (Berwick)


Driberg, T. E. N.
Leonard, W.
Robinson, Kenneth (St. Pancras, N.)


Dye, S.
Leslie, J. R.
Rogers, G. H. R.


Ede, Rt. Hon. J. C.
Levy, B. W.
Ross, William (Kilmarnock)


Edelman, M.
Lewis, T. (Southampton)
Royle, C.


Evans, Albert (Islington, W.)
Lindgren, G. S.
Scollan, T.


Evans, E. (Lowestoft)
Lipson, D. L.
Scott-Elliot, W.


Evans, John (Ogmore)
Lipton, Lt.-Col M.
Segal, Dr. S.


Evans, S. N. (Wednesbury)
Logan, D. G.
Shackleton, E. A. A.


Ewart, R.
Longden, F.
Sharp, Granville


Fairhurst, F.
Lyne, A. W.
Shinwell, Rt. Hon. E.


Farthing, W. J.
McAdam, W.
Shurmer, P.


Fernyhough, E.
McAllister, G.
Silverman, J. (Erdington)


Field, Capt. W. J.
McEntee, V. La T.
Silverman, S. S. (Nelson)


Follick, M.
McGhee, H. G.
Simmons, C. J.


Foot, M. M.
McGovern, J.
Skeffington-Lodge, T. C.


Forman, J. C.
Mack, J. D.
Skinnard, F. W.


Fraser, T. (Hamilton)
McKay, J. (Wallsend)
Smith, S. H. (Hull, S. W.)


Freeman, Peter (Newport)
Mackay, R. W. G. (Hull, N. W.)
Soskice, Rt. Hon. Sir Frank


Ganley, Mrs. C. S.
McKinlay, A. S.
Sparks, J. A.


George, Lady M. Lloyd (Anglesey)
McLeavy, F.
Stewart, Michael (Fulham, E.)


Gibbins, J.
MacPherson, Malcolm (Stirling)
Stross, Dr. B.


Gilzean, A.
Mainwaring, W. H.
Stubbs, A. E.


Glanville, J. E. (Consett)
Mallalieu, J. P. W. (Huddersfield)
Summerskill, Rt. Hon. Edith


Grenfell, D. R.
Mann, Mrs. J.
Swingler, S.


Grey, C. F.
Mathers, Rt. Hon George
Sylvester, G. O.


Grierson, E.
Mellish, R. J.
Symonds, A. L.


Griffiths, D. (Rother Valley)
Messer, F.
Taylor, R. J. (Morpeth)


Griffiths, W. D. (Moss Side)
Middleton, Mrs. L.
Taylor, Dr. S. (Barnet)


Gruffydd, Prof. W. J.
Mikardo, Ian
Thomas, D. E. (Aberdare)


Guest, Dr. L. Haden
Millington, Wing-Comdr E. R.
Thomas, George (Cardiff)


Gunter, R. J.
Monslow, W.
Thorneycroft, Harry (Clayton)


Haire, John E. (Wycombe)
Moody, A. S.
Thurtle, Ernest


Hale, Leslie
Morley, R.
Titterington, M. F.


Hall, Rt. Hon. Glenvil
Morris, Lt.-Col. H. (Sheffield, C.)
Tolley, L.


Hamilton, Lieut.-Col. R.
Morris, P. (Swansea, W.)
Tomlinson, Rt. Hon. G.


Hardy, E. A.
Morris, Hopkin (Carmarthen)
Turner-Samuels, M.


Harris, H. Wilson (Cambridge Univ.)
Mort, D. L.
Ungoed-Thomas, L.


Haworth, J.
Moyle, A.
Vernon, Maj. W. F.


Herbison, Miss M.
Murray, J. D.
Viant, S. P.


Hewitson, Capt M.
Nally, W.
Wadsworth, G.


Hobson, C. R.
Naylor, T. E.
Walker, G. H.


Holman, P.
Neal, H. (Claycross)
Wallace, G. D. (Chislehurst)


Holmes, H. E. (Hemsworth)
Nichol, Mrs. M. E. (Bradford, N.)
Warbey, W. N.


Horabin, T. L.
Noel-Baker, Capt. F. E. (Brentford)
Watkins, T. E.


Houghton, A. L. N. D. (Sowerby)
Noel-Buxton, Lady
Webb, M. (Bradford, C.)


Hoy, J.
Oldfield, W. H.
Wells, P. L. (Faversham)


Hubbard, T.
Oliver, G. H.
West, D. G.


Hudson, J. H. (Ealing, W.)
Orbach, M.
Wheatley, Rt. Hon. John (Edinb'gh, E.)


Hughes, Emrys (S. Ayr)
Paling, Will T. (Dewsbury)
White, H. (Derbyshire, N. E.)


Hughes, Hector (Aberdeen, N.)
Palmer, A. M. F.
Whiteley, Rt. Hon. W.


Hughes, H. D. (W'lverh'ton, W.)
Parker, J.
Wilkes, L.


Hutchinson, H. L. (Rusholme)
Paton, Mrs. F. (Rushcliffe)
Wilkins, W. A.


Hynd, H. (Hackney, C.)
Paton, J. (Norwich)
Williams, D. J. (Neath)


Hynd, J. B. (Attercliffe)
Pearson, A.
Williams, J. L. (Kelvingrove)


Irvine, A. J. (Liverpool)
Peart, T. F.
Williams, Ronald (Wigan)


Irving, W. J. (Tottenham, N.)
Piratin, P.
Williams, Rt. Hon. T. (Don Valley)


Jay, D. P. T.
Poole, Cecil (Lichfield)
Williams, W. T. (Hammersmith, S.)


Jeger, G. (Winchester)
Popplewell, E.
Williams, W. R. (Heston)


Jenkins, R. H.
Porter, E. (Warrington)
Willis, E.


John, W.
Porter, G. (Leeds)
Wills, Mrs. E. A.


Jones, D. T. (Hartlepool)
Price, M. Philips
Woodburn, Rt. Hon. A.


Jones, J. H. (Bolton)
Proctor, W. T.
Wyatt, W.


Keenan, W.
Pryde, D. J.
Yates, V. F.


Kendall, W. D.
Pursey, Comdr. H.
Younger, Hon. Kenneth


Key, Rt. Hon. C. W.
Randall, H. E.



Kinghorn, Sqn.-Ldr. E.
Ranger, J.
TELLERS FOR THE NOES:


Kinley, J.
Rankin, J.
Mr. Joseph Henderson and


Kirby, B. V.
Reid, T. (Swindon)
Mr. Hannan.

New Clause.—(INITIAL AND ANNUAL ALLOWANCES, &C., FOR OFFICE BUILDINGS.)

(1) In section twenty-five of the Income Tax Act, 1945 (which defines the expenditure on which allowances may be given under Part III

of that Act) sub-paragraphs (vi) and (vii) to the proviso to subsection (1) shall be deleted.

(2) In no case shall the amount on which a balancing charge is made upon a person be increased by virtue of the provisions of this section by more than the total amount by which annual allowances made to that person are increased by virtue thereof.

(3) The preceding provisions of this section shall be deemed always to have had effect.—[Mr. Eccles.]

Brought up, and read the First time.

Mr. Eccles: I beg to move, "That the Clause be read a Second time."
The object of this new Clause is to extend to certain office buildings the initial allowance and the annual allowances given under the Income Tax Act, 1945. That Act excluded all office buildings from the scope of the allowances, and the Committee will remember that the argument used by the Treasury Bench in defence, of that exclusion was that office buildings have a value independent of the production unit with which for the time being they are connected. The head office, or it may be the sales office, of a manufacturing company might be in London, and might not lose any of its value if the factory with which it is concerned closed its doors. There was also the argument that office buildings are very often two or three rooms in a big block of buildings, and it would be very difficult to give the allowances in respect of two or three rooms in a large block of buildings.
That argument had some force in relation to the United Kingdom, which is a small and crowded country, though I was not entirely convinced by it at the time, but the Committee will see the force of the proposition put forward by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson). We have taken it into consideration in this new Clause, and therefore we have confined the extension of the allowance to office buildings to those belonging to British mining companies operating overseas.
Part III of the Income Tax Act, 1945, gives an allowance to other types of buildings which are erected as part of the equipment of the mine; for example, the building in which the mining stores are kept, the building in which the production plant is housed, the building in which the winding engine is erected; all these buildings get the allowance. What reason can there be not to extend the cover to other office buildings which may be used for the purpose of drawing offices or assay offices, all of which buildings become substantially valueless when the mine is exhausted?
I think the principle of this new Clause was conceded by the Government when we were discussing Amendments to Clause 18, because, with one small exception, the Government said that the site acquired for buildings such as these would rank for the allowances. If we give the allowance for the site, it is really only reasonable to give it for the buildings erected upon the site, and therefore I think that the principle has already been given away on Clause 18. It does sometimes happen that buildings of this type right on the site of operations may have some value when the mine shuts down. After all, there is a housing shortage in other countries as well as Great Britain, and it is quite conceivable that when a mine closes down somebody may wish to take over the office buildings and live in them. If that does happen, the Act takes care of it, and a balancing charge is imposed upon the value for which the building is sold if it is higher than its written-down value.
I therefore urge the new Clause on three grounds. First, on sheer common sense, because there is really no substantial difference between a building which is used for mining stores and a building used for assaying the mineral daily brought up for testing from the mine itself. I think we ought to go further. The whole of the changes which we are urging in the taxation of British overseas mining companies, many of which were embodied in Clause 18, are designed to remove handicaps upon British companies as compared with mining companies of other countries, and this new Clause represents a small but none the less definite handicap to be removed from British companies. We are in no position for American, Canadian and other companies to have advantages over our companies in developing our material resources abroad.
I hope the Government will look beyond the purely legal principle or the Income Tax principles which governed the situation in July, 1945, when we were discussing for the first time the original Bill. We did not then think how keen would be our anxiety to earn every possible sum in foreign exchange. The Chancellor met us to the extent of setting up a Departmental Committee, upon whose recommendations the changes in this Bill have been founded, and I should


like to thank the right hon. and learned Gentleman for having let me know that he is prepared to publish the report of that Committee. I am sure it will be of great assistance to mining interests.

The Solicitor-General (Sir Frank Soskice): I am sorry that we feel that we cannot accept the proposal in this new Clause, and for these general reasons. The considerations which led to the exclusion of office buildings when the 1945 Income Tax Act was being drafted were not legalistic. They were based on the general economic considerations that priority should be given to buildings which could be said to be industrial. The hon. Gentleman moved a very similar Amendment in 1945 to the Income Tax Act of that year, and the Chancellor of that time, the right hon. Member for the Scottish Universities (Sir J. Anderson), opposed it upon the general economic considerations that office buildings were not the sort of buildings designed to be comprehended by the relief provisions of that Act.
That was subject to one qualification. They are excluded from the initial allowance provided by the first part of the Act, which still stands, but when the question of allowances in connection with mining and oil companies was concerned, there was a slight exception embodied in framing that Act, and it was that, although relief could not be given if there was a separate office building, it could be given in the cases where the office buildings formed part of the main industrial production plant, and provided that the expenditure on the office buildings did not exceed one-tenth of the total expenditure on buildings. The Chancellor of the day felt that he could not go beyond that in replying to the proposal which the hon. Gentleman then made during the Committee stage of the 1945 Income Tax Act.
Substantially, the position now is as it was then, and I say substantially because there is, after all, the Committee on Income Tax which has been set up which will take just this sort of consideration particularly into account. It is par excellence the sort of problem with which that Committee should concern itself, and, in asking the Committee to reject the present proposal, I would say that it was rejected in 1945 for considerations which, broadly speaking, are still applic-

able. It is just the sort of problem which the Committee now sitting should investigate, and it really would be unwise for us to make a change which amends the general principle upon which the 1945 Act was framed. It is precisely the desirability of such changes which will be considered by the Committee now set up to deal with the question of Income Tax and other questions of the basis upon which profits should be computed for purposes of Income Tax. For these reasons, I recommend the Committee to reject the present proposal and to leave it for the consideration of the Committee which has been set up to consider and report upon it.
I would make one comment on the new Clause as it stands. The hon. Gentleman said that he had limited the new Clause to the case of foreign mining concessions. I speak subject to correction, but, certainly as I read it, it does not have that effect, but has the effect of embodying a general exception to the provisions of Section 25 of the Income Tax Act, 1945. For the general reasons that this matter was dealt with in 1945, that there has not been any radical change in the situation which would justify a departure from the principle upon which that Act was framed, that a Committee has been set up to investigate this sort of problem, I would ask the Committee to say that this new proposal should not be accepted.

6.30 p.m.

Mr. C. Williams: I should like to say one or two words on this subject because my hon. and gallant Friend the Member for Camborne (Commander Agnew), whose name is down to the new Clause, is unable to be present. This is a matter of fairly common knowledge to those connected with this kind of industry and one which has existed for a long time. There are one or two instances where companies are working abroad, particularly in tin in Malaya and places like that. Where they have an office which is actually on the mine itself they will get the relief, but supposing that office serves two mines or two or three concerns together, or supposing it does not happen to be so closely connected as far as the location of the building is concerned; then it does not get relief.
There exists, therefore, a definite handicap to those mining industries which


are of great value in developing mining abroad and earning dollars. It has been one of the troubles throughout the whole of the Income Tax laws as far as these companies are concerned. I believe it is the desire of every section of the House to help these companies overseas. It has already been admitted that it is essential to provide the relief for the office on the mine. I think it would be wrong if this Clause were withdrawn without some other hon. Member, in addition to my hon. Friend the Member for Chippenham (Mr. Eccles), who put the case strongly, protesting against this position. It is wrong that we should have this blank refusal by the Government to this comparatively small concession, which would be a dollar-earning concession.
The right hon. and learned Gentleman said, "It will come before a committee very shortly." That, of course, is a great help and it is a point as a result of which, to my mind, we should not be forced into the Divisional Lobby on this Clause. It is, however, a pity that the Government are always putting off these small matters, which are of great value to individuals and as dollar earners, and pushing them out to some other body.
If we really wish to develop our mining overseas, especially within the British Empire, a small concession such as this would be important. It is wrong to hit the mines simply because an office does not happen to be on the site. It is probably highly inconvenient in many cases to have it on the site. There may be several mines where it is not possible to have an office on each one of them; it may be the most economical thing to have one office in a central position dealing with all the mines. Surely the practical proposals in all these things should outweigh the other facts. I feel sure that my hon. Friend the Member for Chippenham, who has shown industry and capacity in this, has at any rate done a useful service in bringing it to the notice of the Committee and showing how completely incapable is the Treasury mind of appreciating, even in this sort of thing, how much the Treasury could do to help our industries abroad.

Mr. Eccles: I think it is very unreasonable of the Solicitor-General to pass this off by saying that it will be looked at

by the committee. We already have Clause 18, which alters the provisions of Part III of the Income Tax Act of 1945 without reference to this Committee. These alterations were the result of a special Departmental Committee and their Report. There is no logic in giving an allowance on the site but refusing it on the buildings on that site, because it may be that the buildings are worth more than one-tenth of the whole amount of the construction. I think this is a very foolish and an obviously arbitrary thing; and when we see something which should be put right we should put it right at once and, as my hon. Friend the Member for Torquay (Mr. C. Williams) said, we should not wait for the report of another committee.
I believe the Solicitor-General is right and that, the new Clause, as we have drafted it, appears to apply to all mines and not only to overseas mines. A very difficult problem arises in regard to mines in this country because they may have head offices in big cities and may bring up a comparison between the way we treat their offices and the way we treat the offices of other industries. I should be ready to withdraw my Clause, but I should like to put it down again, this time restricting it to overseas mines. If the Committee will agree, that is the course I would advise them to take. I, therefore, beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.

New Clause.—(RELIEF IN RESPECT OF FOREIGN INCOME TAX.)

(1) In order to extend the provisions of the law relating to relief in respect of Dominion income tax so as to grant similar relief in respect of foreign income tax, the following enactments shall have effect in relation to the year of assessment commencing on the sixth day of April, nineteen hundred and forty-nine, and all future years of assessment, as if wherever reference is made in each such enactment to a Dominion, there appeared by way of alternative a similar reference to any foreign country:—

(a) section twenty-seven of the Finance Act, 1920, except paragraph (a) of subsection (8) of that section;
(b) section twenty-eight of the Finance Act, 1921;
(c) section forty of the Finance Act, 1927;
(d) paragraph (c) of subsection (9) of section thirty-one of the Finance Act, 1946.

(2) (a) On the making of an Order in Council under section fifty-one of the Finance (No. 2) Act, 1945, (which provides as to arrangements for relief from double taxation of income) with respect to any arrangements relating to a foreign country, this section shall cease to have effect as respects that foreign country except in so far as the said arrangements otherwise provide.

Provided that the preceding provisions of this subsection shall not apply where the said arrangements do not provide that tax payable under the laws of the foreign country concerned shall be allowed as a credit against tax payable in the United Kingdom.

(b) The provisions of this section shall not apply in relation to any taxes payable in the Republic of Ireland.

(3) The expression "any Foreign Country" means any territory outside the United Kingdom which is not a British possession or which is not under His Majesty's protection or in respect of which a mandate is not being exercised by the Government of any part of His Majesty's Dominions.

(4) In no case shall any charge to tax made upon any person be increased by virtue of the provisions of this section.—[Mr. Eccles.]

Brought up, and read the First time.

Mr. Eccles: I beg to move, "That the Clause be read a Second time."
This new Clause is important, in our view. It is very difficult to understand from reading the Order Paper, but I will endeavour to make the matter clear. The Clause seeks to extend compendiously, in one stroke, the provision of Dominion Income Tax reliefs so as to apply to Income Tax payable in foreign countries. The expression "foreign country" is defined in subsection (3).
There are arguments for and against this important proposal. I have tried to give them careful consideration and I have come to the conclusion that it is right to press this Clause at this time because of the difficulties which face us in our export trade. The Committee will agree that if British companies and citizens are to have equal scope and equal encouragement to trade and earn money in foreign countries with citizens of other industrial countries, then they must not be handicapped by having to bear altogether more onerous taxation than their competitors. That seems to me to be a very clear proposition. Any company which embarks upon a foreign venture does so only if it is satisfied with the prospect of making a profit and also with the proportion of that profit which the taxation in the country of operation

and the taxation here in the United Kingdom leaves to it for distribution.
All trade is risky, but there are additional risks in doing business in a foreign country. That means to say that if the profits made by British companies in countries like Mexico or Siam, for example, are first taxed by the local government and afterwards taxed by His Majesty's Government at the standard rate of Income Tax, there will be only a modest fraction of the profit left to the British company. The fact is that the Government of the United States and the Government of Canada give unilateral relief from this kind of double taxation. For example, in the United States of America complete relief from foreign taxes is given up to the full rate of American taxation by Section 131 of the Internal Revenue Code. An American company which is operating, let us say, in Mexico, pays the Mexican Income Tax and can deduct the whole of that payment from its liabilities to United States Income Tax. Obviously, therefore, the attraction of doing new business in a country like Mexico is much greater to an American company than to a British company, since the American company knows that if it makes a profit it will be able to bring home a much larger proportion of its earnings.
It is to get rid of this handicap that we have put down this new Clause. His Majesty's Government have been well aware of the problem for a long time and they have been tackling it on quite different lines. They have been negotiating a series of double taxation agreements with all those countries which were willing to enter into such agreements. Under those agreements the two countries concerned give reciprocal concessions and the scope of the agreements has been extended to cover property as well as income. These double taxation agreements are very useful and thoroughly to be commended. They have been made, or are still in the process of negotiation, with nearly all countries with whom we have a substantial two-way flow of income. It is quite obvious that if there is not income flowing from the United Kingdom to a foreign country, there is not much inducement to the foreign country to enter into a multilateral tax agreement with the Government of the United Kingdom.
We come to the point where there remains a group of countries, of which the majority can be called undeveloped countries, with whom agreements are not being made and are not very likely to be made. Among the most important of these are the following: the Belgian Congo, Brazil, Burma, Colombia, Iran, Iraq, Mexico, Portugal, Siam, Spain and Venezuela. Of those countries it might be said that all except two are too young to make a double taxation agreement and two of them—Spain and Portugal—are too old.
What are we going to do about the great handicap which is laid upon British business because we do not appear likely to be able to make these multilateral taxation agreements with these important countries? There seems to me to be two courses open to His Majesty's Government. Either they can go on hoping that one day or other they will be able to make double taxation agreements with this remaining group of countries or they can rest upon the number of multilateral agreements they have made so far and add a Clause to the Finance Bill of the type of which I am speaking which would give unilateral relief to British citizens in respect of this small remaining group of countries.
I know there are arguments on both sides of this question, but I believe the time has come to adopt the latter course. The Solicitor-General may tell us that it would be unfair to those countries with which we have concluded a double taxation agreement now to rush in and give unilateral relief and encouragement to British traders in all the other countries who have not entered into such agreements. I do not think we should make too much of that argument. There is something rather disagreeable about the fact, but this is a hard world and we have to do the best we can for British trade. My hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) and I feel that we should take some notice of the argument, however, and therefore in our Clause we are not seeking to give the whole relief to the British taxpayer; we are seeking only to apply the provisions of Dominion Income Tax relief to those countries with which we have not a double taxation agreement. That still leaves to our Treasury negotiators some-

thing to bargain with if it ever does become possible to make double taxation agreements with this remaining group of countries.
6.45 p.m.
The Committee is probably only too familiar with the exact rates and conditions of Dominion double taxation relief. Broadly speaking, that is the relief which is set against the United Kingdom tax on income, which is either the rate of foreign tax that has been suffered or half the standard rate of British tax, whichever is the lower. I do not know what the rate of tax may be, but if Income Tax in Brazil is 6s. in the £, under Dominion Income Tax relief it is roughly true to say the British company is relieved to the extent of 4s. 6d., being half of the British standard rate. That may not be exactly true, but it is near enough. So we are not even doing in our new Clause what I hope we may do one day, namely, to put British companies on all fours with the United States and Canadian companies in the matter. However, we are going a long way towards it, and it is an important step which I think we ought to take.
It really must appear to the Government, in the present predicament of our balance of payments, that any suggestion which encourages the earning of foreign exchange by this country is worthy of very sympathetic consideration. It is quite clear that we are now entering a phase of international trade where the stocking boom is over, and that there is going to be very keen competition in the capital goods industries of the world to get the contracts to open up new sources of supply, to build harbours, railways, airfields, and things of that sort. There cannot be any doubt that the capital goods industries of the great industrial nations are going to have a hard tussle between each other to see who gets these contracts, and the Americans are as keen as anyone else. Is it right that we should handicap British business compared with American business?
If I thought that the Treasury could negotiate double taxation agreements with all those remaining countries—taking particularly the Middle Eastern countries and Venezuela, where great development is bound to take place—if I thought it could do that within a very short period, I should leave it to the Treasury to do it. If anyone can do it, then I say—because


I know them well—that the Treasury negotiators can do it. However, it is not so. Those developing countries do not see what they get out of an agreement of that sort, and so they do not enter into negotiations; or if they do, they pitch their demands so high that nothing ever comes of them. Therefore, as I say, this is one of the steps it is open to the Government to take to encourage foreign exchange earnings, and they ought to consider this proposal sympathetically.
What would it cost? I do not know. I know only that the cost would be a mere fraction of the sort of sums which we place at the disposal of the President of the Board of Trade through the Export Credits Guarantee Department—the vast sums which are now being given to that Minister to spend where he thinks it is possible to back up projects for increasing our earnings overseas. I think it better to equalise the handicaps between British traders and American traders and let them "go to it." I believe that to be much the most economical way, from the point of view of the Revenue, and one that is likely to bring in more foreign exchange.
I apologise for setting out the argument at some length, but obviously this is an important Clause. I hope that even if the Solicitor-General has not the Chancellor's permission to accept it, it may be that he will take this argument seriously, and that between now and Report stage something can be done about it. All our friends throughout the world are asking whether we are doing our best to get on our own feet. Here is something which we can do. I feel that the whole Committee will agree with me that there are no politics in this at all. We just want to make things equal as between Canadian business, American business and British business.

Mr. Walter Fletcher: I wish to support every word my hon. Friend the Member for Chippenham (Mr. Eccles) has said. During the last year I have been pressing on the Chancellor of the Exchequer to negotiate something in the way of an agreement to deal with taxation in France, Belgium and this country. Only a fortnight ago I asked a Question on that, and was told that it is very difficult indeed to arrive at a conclusion. How

much more difficult is it to arrive at a conclusion with people not in the same advanced stage of business organisation as are those two countries.
At the present moment, some of the greatest exports to which we have to look in the near and the distant future are those comprised in invisible exports. There is no doubt about it that the export of the "know-how," of knowledge and experience, in the near future, when we have a big economic crisis lowering down on us, will be a great potential source of revenue. I believe that other countries will turn to us as the most experienced traders and the most experienced solvers of difficult economic riddles—which we have proved ourselves to be over centuries—for our experience and knowledge.
This great handicap put on the trader, which is much increased, should at this juncture be mitigated and, if possible, brought to an end. It took the Government a year or two to learn what invisible exports are—they did not appear in the Government's programme in their first year or two in office—and then they gave them high priority, especially under the present Chancellor. Just as they were slow to learn what invisible exports are, so must they learn that the extension of our invisible exports at present is of vital importance, and that there is no greater handicap—and I speak as one who has trading posts, so to say, in countries all over the world, from Indo-China to South America—than this harsh taxation, which presses extremely heavily on the working of any public company on behalf of shareholders. It means that directors are faced with a bet of something like four to one on behalf of their shareholders the whole time. Those are difficult conditions, and not what directors can face with any degree of equanimity.
I believe that this Clause is in a way far more important even than it appears to be on the surface. If we are to get more multilateral trade, surely the last thing we ought to do is to handicap and hamstring those people who are able and willing and enterprising enough to undertake trade. If we continue to place such heavy handicaps on them, we shall kill enterprise, or we shall export it altogether, which is the possible alternative. I have very great pleasure in supporting my hon. Friend's new Clause.

The Solicitor-General: We feel, having given very careful consideration to this matter, that really it is undesirable to deal with these questions of foreign taxation otherwise than through bilateral arrangements. One has to remember this, that foreign tax is treated as a deduction in computing profits in this country both for the purpose of Income Tax and Profits Tax. Therefore, with the standard rate at 9s. in the £—if we can take Income Tax and Profits Tax together—approximately already, as the law stands at the moment, without any unilateral relief being afforded as suggested, relief is given to the extent of half the foreign tax. The whole foreign tax is treated as a deduction, and, therefore, relief is given in the respect of foreign tax, and is allowed against profits for Income Tax and Profits Tax.
I do not feel that I really can put the matter any better—perhaps, it would be presumption on my part if I supposed I could—than it was put by the right hon. Member for the Scottish Universities (Sir J. Anderson) during his Budget speech on 24th April, 1945, when he was dealing with this particular topic. He was referring then to the convention at that time recently negotiated between the United Kingdom and the United States. I desire to quote what he said:
We could, of course, deal with the problem by ourselves if we liked. There is no reason why this House, if so minded, should not provide that income for assets coming under charge to tax in foreign countries should be charged in this country only to the extent that the appropriate British charge might exceed the foreign charge. Such an allowance, no doubt, provides an appropriate solution over part of the field, but the unilateral approach is not in my view the way to tackle the question. Double charges of this kind ought to be eliminated in a regulated fashion which will distribute the cost equitably between the Governments concerned and for that purpose we have to proceed by agreement with like minded foreign Governments."—[OFFICIAL REPORT, 24th April, 1945; Vol. 410, c. 704.]
The case made by the hon. Member for Chippenham (Mr. Eccles) is that, in present-day circumstances, it is urgently necessary to lift from the shoulders of British undertakers operating in foreign markets, so far as we can, the burdens which impinge upon them. It is not as if we had not already made very substantial progress in regard to the conclusion of these bilateral agreements. If it could be said that this had been an extraordinarily slow business, and that we were

making very little advance in concluding agreements which included other countries, then there would be more in the argument that we should proceed in this unilateral fashion. However, I think that probably the Committee would be interested to know and have from me a short statement as to the present position in the case of a number of countries. I shall just give the details showing what is the position approximately at the moment.
Agreements have been so far made with the United States of America, Canada, Australia, New Zealand, South Africa, most of the Colonies, and the Netherlands. An agreement with Sweden has been signed but not yet ratified, and an agreement at the official level has been reached with Denmark. An agreement with France is at present being negotiated, and that was one of the countries the hon. Member for Bury (Mr. W. Fletcher) mentioned. Discussions are continuing with Belgium, which I think he also mentioned, and also with Burma. Draft agreements have been put to the Governments of Norway and Indonesia, and, in the Commonwealth, to India, Pakistan, and Ceylon. The first approach has been made to Finland.
With regard to South American countries, which the hon. Member for Chippenham rather put in the forefront of his argument, the position is that we have recently concluded an agreement with the Argentine restricted to shipping and air transport, and we propose to follow it up with negotiations for a more comprehensive agreement not limited to those particular industries. Brazil, which I think he also mentioned as one of the countries he had particularly in mind, has expressed willingness to enter into discussions, and proposals will shortly be sent to Brazil. The hon. Gentleman also mentioned Venezuela, and Venezuela has also been recently asked whether it will negotiate an agreement of this sort.

Mr. Stanley: Has there been any answer?

The Solicitor-General: An approach has been made. It has not yet said it will, so far as I know from the note before me. However an approach has been made.
What I am concerned to show is that substantial progress has been made, and I am attempting to argue that there would


have been more force in the hon. Gentleman's case if such progress had not been made. But as I have established, as I hope he will agree I have established, that we have really covered a great many of the countries already, and that we are taking active steps to go further with this policy of bilateral agreements to include other countries with which we conduct international trade, then really the case which he submitted instead is much weaker than it may appear at first sight.
7.0 p.m.
As he said, there are two schools of thought. The question is: should we try to have an overall arrangement which embraces all the countries and which shares out the burden of expense equitably between the countries concerned in the negotiations, or should this country take it upon itself to afford relief unilaterally and at its own expense? I would remind the Committee of what the then Chancellor of the Exchequer said in 1945. We think that is right, and we do not really think that the situation can be said to have altered from what it was when he used, in relation to it, the words which I have quoted. An important consideration to bear in mind is that the burden really is only approximately half of what it was, as I understand from the argument of the hon. Member for Chippenham, because already there is taxation relief as to half the foreign tax. For those general reasons I hope the Committee will agree that the considerations against unilateral relief, on the whole, outweigh the considerations in favour of unilateral relief, and will therefore agree with the submission that I make that this new Clause ought not to be adopted.

Mr. John Foster: There is a factor in relation to double taxation which the Solicitor-General has not appreciated. The United States have been the pioneers in making double taxation agreements, and in 1944, when this country was very reluctant to enter into a double taxation agreement, it was due to the initiative and the arguments of the United States delegates that we were persuaded to enter into that first great agreement. Although the United States are the pioneers of double taxation, they also have a section in their law to which this new Clause approxi-

mates, namely, Section 131 which is a very well-known provision in the realm of double taxation.
This new Clause has a different object and a different result. It does not conflict in any way with the system of making bilateral agreements with foreign countries. Section 131, like this Clause, is designed to save people a certain amount of tax because it is felt that it is unfair to charge them tax twice over. The object of a bilateral double taxation agreement is to benefit the citizens of both countries; we give up some tax to a foreign country and they give up some tax to us. The Americans have kept it quite distinct. They have had Section 131 in their law for many years and they are also very anxious to conclude as many bilateral agreements as possible.
Putting it in layman's language, the Clause says that if a person has paid some tax in a foreign country and he is assessable to British Income Tax, he is entitled to set off the amount of tax he paid in the foreign country against his British tax, but, following the line of British Dominion tax relief in relation to Section 131 of the United States Code, he does not get the whole of it; he gets either the British standard rate or another alternative which I have forgotten for the moment. [An HON. MEMBER: "Or the foreign tax."] I am obliged to my hon. Friend. That is quite a different object. I ask the Solicitor-General to consider this Clause from that point of view. It does not affect foreign countries in the least. A foreign country which realises that America has Section 131 does not say, "We will conclude a bilateral agreement." An undeveloped country which is not anxious to conclude a bilateral agreement is not affected one way or another by the principle of Section 131.
The answer of the Solicitor-General, that foreign tax is deducted in computing profits and Income Tax, is not correct. A simple mathematical computation will show that if a person earns £100 abroad, after paying British Income Tax he gets a profit of £55. If a foreign country imposes a tax of 20 per cent., the present method is to charge 45 per cent. on £80, because £100 less £20 is £80. Suppose that this was a straight Section 131 principle; one would charge 45 per cent. in


England, the man would be credited with having paid 20 per cent. abroad; he would pay 25 per cent. in England and 20 per cent. abroad, which is 45 per cent., and he would have 55 per cent. left, exactly as if he had paid 55 per cent. in England. That is the object of Section 131. The foreign tax rate is reduced to half the standard rate or the foreign rate whichever is the least.
There is no antithesis between Section 131, which is the easy United States method, and double taxation agreements, The advantages are those set up by my hon. Friend the Member for Chippenham (Mr. Eccles). It encourages British subjects to export to those countries where they would get the benefit of what corresponds to Dominion tax relief. It is fair because they paid tax in a foreign country, and, instead of just getting the advantage of the foreign tax being counted as an expense, it would be counted as a credit against the tax which they paid here.
There are still many reasons for concluding double taxation agreements, because with a system of Dominion taxation reliefs there are many anomalies and injustices on the taxpayer. In the British-American Agreement, there is a liberalisation of the tax systems of the two countries. For instance, professors and lecturers who go to the United States and who are domiciled in this country do not pay any more or any less Income Tax. It is levied on them here, and the same applies in the reverse case. That is very different from saying that a lecturer who pays American Income Tax should be entitled to credit it against his British Income Tax. The situation is quite different. In the case of American Corporation Tax, that is levied on corporations and, therefore, is attributable to each share in an American corporation.
Under the double taxation agreement the Americans have let off British subjects—I use that expression to illustrate persons domiciled in this country and so on—paying that tax because they feel that it is a liberalisation of the economic relations between the two countries. One could go through the British-American double taxation agreement and find many instances where we have given up the tax for persons who came over here—for instance, persons other than those in the entertainment industry who spend less than 168 days in England. Those people

are let off the tax. We get a corresponding advantage. People who go to the United States are let off the American tax. The double taxation agreement works the same in both countries. It says, "We in England will do so-and-so to your people if you will do so-and-so to ours."
All that this provision says is that if our people have to pay tax abroad they will get a credit. I ask the Solicitor-General to consider this Clause from that point of view and to appreciate that it is not a question of bilateral agreements against unilateral agreements. They are not in opposition. We are proposing a relief to our people who trade abroad, to encourage them to trade, and to develop invisible exports so that these people will receive, not more profit than if they had traded in England, but at least as much. A man who can sell for £100 profit in England gets £55. After a lot of trouble in exporting and so on, let us assume that he gets £100 in the Argentine. If he pays £20 in Argentine tax he only gets 45 per cent. of £80. Why should he go to all that trouble if he can sell in this country? We want him at least to be able to make as much in foreign markets as he makes in this country. To penalise a man who trades in a country where he has to pay foreign tax cannot be sensible. There is no question of party politics; this is a technical matter.
I would refer the Solicitor-General to some very learned articles and proceedings in the two Congresses of the International Fiscal Association, which has been adopted as one of the societies working under United Nations. They have done a lot of study on this, and in one of their proceedings it was pointed out that Section 131 of the United States code was a very enlightened Section when passed. It has been of very great benefit to the Americans, and all we are asking is to give us half of that back.

Mr. Stanley: I must say that my hon. Friend the Member for Northwich (Mr. J. Foster), who has very great knowledge on this particular topic, has put up a formidable case, and I trust that some further answer will be given from the Treasury Bench. As he says, this is not a matter which raises any party division. It is a technical matter, and with the general object I think we are all agreed. We want to give to the industrialists


trading abroad a fair deal compared with their fellow industrialists who trade in this country. It is, indeed, the avowed object of this Government to make it, on the whole, more advantageous to trade abroad than to trade at home. Therefore, I think that all of us start with a desire to clear up this anomaly, unless there are very grave reasons against it.
I admit straight away that I was impressed by the Solicitor-General's speech. If it is true that there is a complete antithesis between the method proposed in this new Clause, the method of unilateral legislation, and the method which has been pursued now for three or four years, then all of us would prefer the method of bilateral agreements so long as that method still has a chance. It is quite clear that if we fall back on that method alone, a time will come when bilateral agreements have been completed with all the countries with which we are likely to be successful, and then, presumably, we legislate for the rest. The Solicitor-General produced a not at all unsatisfactory list of agreements which have been concluded or are being discussed, and he made a good case for saying that this bilateral method is still going well, even if finally we have to deal with the residue by legislation, and that we ought to give the treaty method a chance for a bit longer. That, of course, depends on there being this antithesis between the two methods.
The purpose of my hon. Friend's speech was to point out that experience shows that no such antithesis exists in America, the country which is the pioneer in this field and which has on its statute book the type of Clause we are proposing here. It is that argument, from experience and not from theory, that no antithesis exists which right hon. Gentlemen opposite have got to meet. I must confess that, unless they have some answer to the proved fact that the United States, devoted as they are to the methods of bilateral agreements, have yet found it necessary and advisable and in no way disadvantageous to have a Clause of this character, that fact will certainly guide me in my action upon this Clause.
We are all looking for the same thing, and we do not want to press this to a conclusion now, if the Solicitor-General wishes to look at the matter again. It

is certainly a matter of considerable importance to which at some time or other we must have an answer, which we all hope will be a favourable one.

7.15 p.m.

The Solicitor-General: I fear that I did not make my argument completely clear, thus producing the impression that there was an antithesis. What I was trying to convey is that there are two methods. There is the Section 131 method, which puts the whole of the cost of relief on the country which gives the relief, and there is the bilateral method, the method by which each country shares the cost, which is the method we prefer. The only antithesis is that the methods differ in that respect. We think, as the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) thought, that it is in the long run desirable that the bilateral method should be adopted. When the right hon. Gentleman used the words I quoted, he had fully in mind Section 131 of the American Code. That has been part of the American Code for a long time, it was part of the American Code before the right hon. Gentleman made his speech in 1945. I have not the smallest doubt that, with his great experience of these matters, he must have considered it. He was particularly talking in relation to the American Convention which had been concluded.
The two systems are, in a sense, complementary, but we think we should aim at the cost of this taxation relief being equally borne. The case I have tried to make is that we have made substantial progress along that path. I did not mean Members opposite to understand that the relief which is obtained from the fact that foreign tax is relief against expenses is as advantageous as the relief afforded under either system to the taxpayer. On the contrary, foreign tax is treated as deductions both for Profits Tax and Income Tax purposes, with the result that there is relief, not in respect of the whole of the foreign tax, but in respect of half—that is, crediting the Profits Tax and Income Tax at 9s. in the £. I used that argument, not to destroy the argument which was used against me, but to submit that it would have less force if any relief were given under the existing law. For these reasons, notwithstanding the invitation extended to me, and in spite of the arguments of the hon. Member for


Northwich (Mr. J. Foster), we feel that we must adhere to the decision we have given. Therefore, I invite the Committee to reject the new Clause.

Mr. J. Foster: I am sorry, but I think that there is a fallacy underlying the Solicitor-General's argument. The relief in a double taxation convention is not shared by both countries. In a double taxation convention each country gives relief to its own people, and under Section 131 agreements one country gives relief to its own people. The cost is never shared under bilateral agreements.

Mr. Glenvil Hall: My right hon. and learned Friend has just said so.

Mr. Foster: If he said so, he is wrong. Without giving away any official secrets one can say that the attitude of the Treasury at that time was very much against double taxation, and there was a great deal of difficulty in persuading them. Take the British subject who owns £100. He pays £20 in the Argentine and is taxed on the £80. Section 131 gives him relief in the sense that he pays tax on £100 and gets credited with the £20 he has paid in the Argentine. It is difficult to work out the fraction, but it means that a British subject has relief of tax to the extent of about £7 or £8. If a bilateral agreement is made with the Argentine they will not take £3 10s. They will say, "We shall let our own people have £7. In certain other cases, where you tax Argentinians and we tax British subjects, we will give you relief and you will give us relief."
In the case of royalties, following the British-American pattern, the English would say, "We shall not tax Argentinian authors" and the Argentine would say, "We shall not tax British authors in the Argentine." In any case British and Argentine subjects would share the relief given by the British to British subjects. There is no question of that. The British are saying, "We do not care for a moment what other countries are doing; we think it only fair that British subjects should pay taxes abroad and have that amount of relief against English taxes." In other words, 45 per cent. of the £s will be what they gain.
The Section 131 principle, divided by half, has been working for many years in the Dominions. There is no question

of Australians and us sharing relief given to United Kingdom people who have to pay Australian taxes. If the Australians do the same to their own people, that is no concern of ours. There is no question of the cost we incur being later taken over by a double taxation agreement with other countries. I press the Government to say that the Section 131 principle is a good one and that it encourages our export trade and should be introduced in this country on the principle of extending to foreign countries relief which we think is right for our people who suffer taxation in the Dominions.

Mr. Eccles: We put down this Clause with the object of equalising the handicaps between business men of Britain and other countries. I am sure that Members on all sides of the Committee will agree with that object. The only reason for withdrawing the Clause would be if the Solicitor-General had convinced the Committee that the adoption of the principle of Section 131 would make it much more difficult to conclude double taxation agreements. Personally, I like such agreements; they cover a wide range of things and I think they are a good thing. The Solicitor-General has not put forward any argument to show that the adoption of the Clause would impede the Government's negotiators any more than Section 131 has impeded the American Government's negotiators. That being so, I hope the Clause will be pressed to a Division.

Colonel Haughton: The Solicitor-General quoted a speech made by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) some time ago, and said that the situation today was very much the same as it was at the time that speech was made. We differ from that suggestion. My hon. Friend the Member for Bury (Mr. W. Fletcher) pointed out that the importance of invisible exports is now realised, and that there is a growing realisation of their importance. That being so, what is involved is not only what is made as profit in this country but profit made by means of royalties on what is sold abroad, such as books. The Debate has shown all reasonable and right-minded people that this is an important point, and it is very unsatisfactory that the Government should say that the situation today is as it was when my right hon.


Friend made his speech, and allow the matter to go by default.
I deplore the fact that the technical aspect of this matter should be stressed so much. We should come back to the commonsense point of view. We should all agree that there ought not to be double taxation, that invisible exports should be encouraged and that people who use their energy to create these exports should not be put at a disadvan-

tage. When a Clause such as this has been brought forward, after deep thought, it is wrong for the Government to say that they prefer some other method, and to rely on something which has been said in the past. I ask the Solicitor-General to give the matter further consideration.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 115; Noes, 272.

Division No. 185.]
AYES
[7.27 p.m.


Amory, D. Heathcoat
Hinchingbrooke, Viscount
Ponsonby, Col. C. E.


Assheton, Rt. Hon. R.
Hogg, Hon. Q.
Price-White, Lt.-Col. D.


Baldwin, A. E.
Hollis, M. C.
Prior-Palmer, Brig. O.


Boles, Lt.-Col. D. C. (Wells)
Howard, Hon. A.
Raikes, H. V.


Bower, N.
Hudson, Rt Hon. R. S. (Southport)
Ramsay, Maj. S.


Boyd-Carpenter, J. A.
Hurd, A.
Rayner, Brig. R.


Braithwaite, Lt.-Comdr. J. G.
Hutohison, Col. J. R. (Glasgow, C)
Renton, D.


Bullock, Capt. M.
Jeffreys, General Sir G.
Roberts H. (Handsworth)


Channon, H.
Joynson-Hicks, Hon. L. W.
Roberts, W. (Cumberland, N.)


Clarke, Col. R. S.
Kendall, W. D.
Robinson, Roland (Blackpool, S.)


Clifton-Brown, Lt.-Col. G.
Kerr, Sir J. Graham
Ropner, Col. L.


Conant, Maj. R. J. E.
Langford-Holt, J.
Savory, Prof. D. L.


Cooper-Key, E. M.
Law, Rt. Hon. R. K.
Scott, Lord W.


Corbett, Lieut.-Col. U. (Ludlow)
Lennox-Boyd, A. T.
Shephard, S. (Newark)


Crookshank, Capt. Rt. Hon. H. F. C.
Linstead, H. N.
Spearman, A. C. M.


Crosthwaite-Eyre, Col. O. E.
Lipson, D. L.
Stanley, Rt. Hon. O.


Cuthbert, W. N.
Lloyd, Selwyn (Wirral)
Stewart, J. Henderson (Fife, E.)


Darling, Sir W. Y.
Low, A. R. W.
Strauss, Henry (English Universities)


Digby, Simon Wingfield
Lucas, Major Sir J.
Stuart, Rt. Hon. J. (Moray)


Dodds-Parker, A. D.
Lucas-Tooth, Sir H.
Studholme, H. G.


Drewe, C.
McCorquodale, Rt. Hon. M. S.
Sulcliffe, H.


Dugdale, Maj. Sir T. (Richmond)
Macdonald, Sir P. (I. of Wight)
Taylor, C. S. (Eastbourne)


Duthie, W. S.
Mackeson, Brig. H. R.
Teeling, William


Eccles, D. M.
Maclean, F. H. R. (Lancaster)
Thomas, Ivor (Keighley)


Foster, J. G. (Northwich)
Maitland, Comdr. J. W.
Thornton-Kemsley, C. N.


Fox, Sir G.
Marlowe, A. A. H.
Thorp, Brigadier R. A. F.


Fraser, Sir I. (Lonsdale)
Marples, A. E.
Turton, R. H.


Gage, C.
Maude, J. C.
Vane, W. M. F.


Galbraith, Cmdr. T. D. (Pollok)
Meltor, Sir J.
Wadsworth, G.


Galbraith, T. G. D. (Hitthead)
Morris, Hopkin (Carmarthen)
Wakefield, Sir W. W.


Gammans, L. D.
Morris-Jones, Sir H.
Walker-Smith, D.


Glyn, Sir R.
Morrison, Rt. Hon. W. S. (Cirencester)
Ward, Hon. G. R.


Gomme-Duncan, Col. A.
Mott-Radelyffe, C. E.
Williams, C. (Torquay)


Grimston, R. V.
Noble, Comdr. A. H. P.
Williams, Gerald (Tonbridge)


Hannon, Sir P. (Moseley)
Odey, G. W.
York, C.


Harden, J. R. E.
O'Neill, Rt. Hon. Sir H.



Harris, F. W. (Croydon, N.)
Osborne, C.
TELLERS FOR THE AYES:


Harvey, Air-Comdre. A. V.
Peake, Rt. Hon. O.
Commander Agnew and


Haughton, Colonel S. G. (Antrim)
Peto, Brig. C. H. M.
Colonel Wheatley.


Headlam, Lieut.-Col Rt. Hon. Sir C.
Pickthorn, K.





NOES


Acland, Sir Richard
Beswick, F.
Castle, Mrs. B. A.


Adams, Richard (Balham)
Bevan, Rt. Hon. A. (Ebbw Vale)
Chamberlain, R. A.


Albu, A. H.
Binns, J.
Champion, A. J.


Allen, A. C. (Bosworth)
Blackburn, A. R.
Chetwynd, G. R.


Alpass, J. H.
Blenkinsop, A.
Cluse, W. S.


Anderson, A. (Motherwell)
Blyton, W. R.
Cobb, F. A.


Attewell, H. C.
Bowden, Flg. Offr. H. W.
Cocks, F. S.


Austin, H. Lewis
Braddock, Mrs E. M. (L'pl. Exch'ge)
Collick, P.


Awbery, S. S.
Braddock, T. (Mitcham)
Collins, V. J.


Ayles, W. H.
Bramall, E. A.
Colman, Miss G. M.


Ayrton Gould, Mrs. B.
Brook, D. (Halifax)
Cook, T. F.


Bacon, Miss A.
Brooks, T. J. (Rothwell)
Cooper, G.


Baird, J.
Broughton, Dr. A. D. D.
Corlett, Dr J.


Balfour, A.
Brown, George (Belper)
Crawley, A.


Barnes, Rt. Hon. A. J.
Brown, T. J. (Ince)
Crossman, R. H. S.


Barsbow, P. G.
Bruce, Maj. D. W. T.
Cullen, Mrs.


Barton C.
Burden, T. W.
Daggar, G.


Battley, J. R.
Burke, W. A.
Daines, P.


Bechervaise, A. E.
Butler, H. W. (Hackney, S.)
Davies, Edward (Burslem)


Bellenger, Rt. Hon. F. J.
Callaghan, James
Davies, Ernest (Enfield)


Benson, G.
Carmichael, James
Davies, Harold (Leek)




Davies, Haydn (St. Pancras, S. W.)
Lavers, S.
Rhodes, H.


Davies, R. J. (Westhoughton)
Lee, F. (Hulme)
Ridealgh, Mrs. M.


Davies, S. O. (Merthyr)
Lee, Miss J. (Cannock)
Roberts, Goronwy (Caernarvonshire)


Deer, G.
Leonard, W.
Robertson, J. J. (Berwick)


Delargy, H. J.
Leslie, J. R.
Robinson, Kenneth (St. Pancras, N)


Diamond, J.
Levy, B. W.
Rogers, G. H. R.


Dobbie, W.
Lewis, T. (Southampton)
Ross, William (Kilmarnock)


Dodds, N. N.
Lindgren, G. S.
Royle, C.


Driberg, T. E. N.
Lipton, Lt.-Col. M.
Scollan, T.


Dye, S.
Logan, D. G.
Scott-Elliot, W.


Edwards, W. J. (Whitechapel)
Longden, F.
Segal, Dr. S.


Evans, Albert (Islington, W.)
Lyne, A. W.
Sharp, Granville


Evans, E. (Lowestaff)
McAdam, W.
Shawcross, C. N. (Widnes)


Evans, John (Ogmore)
McAllister, G.
Shurmer, P.


Evans, S. N. (Wednesbury)
McEntee, V. La T.
Silverman, J. (Erdington)


Ewart, R.
McGhee, H. G.
Silverman, S. S. (Nelson)


Fairhurst, F.
McGovern, J.
Simmons, C. J.


Farthing, W. J.
Mack, J. D.
Skeffington-Lodge, T. C.


Fernyhough, E.
McKay, J. (Wallsend)
Skinnard, F. W.


Field, Capt. W. J.
Mackay, R. W. G. (Hull, N. W.)
Smith, S. H. (Hull, S. W.)


Follick, M.
McKinlay, A. S.
Sorensen, R. W.


Foot, M. M.
McLeavy, F.
Soskice, Rt. Hon. Sir Frank


Forman, J. C.
MacPherson, Malcolm (Stirling)
Sparks, J. A.


Fraser, T. (Hamilton)
Macpherson, T. (Romford)
Stubbs, A. E.


Gallacher, W.
Mainwaring, W. H.
Swingler, S.


Ganley, Mrs. C. S.
Mallalieu, J. P. W. (Huddersfield)
Sylvester, G. O.


Gilzean, A.
Mann, Mrs. J.
Symonds, A. L.


Glanville, J. E. (Consett)
Marquand, Rt. Hon. H. A.
Taylor, R. J. (Morpeth)


Gordon-Walker, P. C.
Mathers, Rt. Hon. George
Thomas, D. E. (Aberdare)


Grey, C. F.
Mayhew, C. P.
Thomas, George (Cardiff)


Grierson, E.
Mellish, R. J.
Thomas, I. O. (Wrekin)


Griffiths, D. (Rother Valley)
Messer, F.
Thomas, John R. (Dover)


Griffiths, Rt. Hon. J. (Llanelly)
Middleton, Mrs. L.
Thorneycroft, Harry (Clayton)


Griffiths, W. D. (Moss Side)
Mitchison, G. R.
Thurtle, Ernest


Guest, Dr. L. Haden
Moody, A. S.
Timmons, J.


Gunter, R. J.
Morley, R.
Titterington, M. F.


Hale, Leslie
Morris, Lt.-Col. H. (Sheffield, C.)
Tolley, L.


Hall, Rt. Hon. Glenvil
Morris, P. (Swansea, W.)
Tomlinson, Rt. Hon. G.


Hamilton, Lieut.-Col. R.
Mort, D. L.
Turner-Samuels, M.


Hardy, E. A.
Moyle, A.
Ungoed-Thomas, L.


Henderson, Joseph (Ardwick)
Murray, J. D.
Vernon, Maj. W. F.


Herbison, Miss M.
Nally, W.
Viant, S. P.


Hewitson, Capt. M.
Naylor, T. E.
Walker, G. H.


Hobson, C. R.
Neal, H. (Claycross)
Wallace, G. D. (Chislehurst)


Holmam, P.
Nichol, Mrs. M. E. (Bradford, N.)
Warbey, W. N.


Holmes, H. E. (Hemsworth)
Noel-Buxlon, Lady
Warkins, T. E.


Horabin, T. L.
Oldfield, W. H.
Webb, M. (Bradford, C.)


Houghton, A. L. N. D. (Sowerby)
Oliver, G. H.
Weitzman, D.


Hoy, J.
Orbach, M.
Wells, P. L. (Faversham)


Hubbard, T.
Paling, Will T. (Dewsbury)
West, D. G.


Hudson, J. H. (Ealing, W.)
Palmer, A. M. F.
Wheatley, Rt. Hon. John (Edin'gh, E.)


Hughes, Emrys (S. Ayr)
Pargitsr, G. A.
White, H. (Derbyshire, N. E.)


Hughes, Hector (Aberdeen, N.)
Parker, J.
Whiteley, Rt Hon. W.


Hughes, H. D. (W'lverh'pton, W.)
Parkin, B. T.
Wigg, George


Hutchinson, H. L. (Rusholme)
Paton, Mrs. F. (Rushcliffe)
Wilkes, L.


Hynd, H. (Hackney, C.)
Paton, J. (Norwich)
Wilkins, W. A.


Hynd, J. B. (Attercliffe)
Pearson, A.
Willey, F. T. (Sunderland)


Irving, W. J. (Tottenham, N.)
Peart, T. F.
Williams, D. J. (Neath)


Isaacs, Rt. Hon. G. A.
Poole, Cecil (Lichfield)
Williams, J. L. (Kelvingrove)


Jay, D. P. T.
Popplewell, E.
Williams, Ronald (Wigan)


Jeger, G. (Winchester)
Porter, E. (Warrington)
Williams, Rt. Hon. T. (Don Valley)


John, W.
Porter, G. (Leeds)
Williams, W. R. (Heston)


Jones, Rt. Hon. A. C. (Shipley)
Price, M. Philips
Willis, E.


Jones, D. T. (Hartlepool)
Proctor, W. T.
Wills, Mrs. E. A.


Jones, Elwyn (Plaistow)
Pryde, D. J.
Woodburn, Rt. Hon. A.


Jones, J. H. (Bolton)
Pursey, Comdr. H.
Wyatt, W.


Keenan, W.
Randall, H. E.
Yates, V. F.


Key, Rt. Hon. C. W.
Ranger, J.



Kinley, J.
Rankin, J.
TELLERS FOR THE NOES:


Kirby, B. V.
Rees-Williams, D. R.
Mr. Collindridge and Mr. Hannan.


Lang, G.
Reid, T. (Swindon)

New Clause.—(RELIEF OF INCOME TAX WHERE TOTAL COST OF EDUCATION IS BORNE BY TAXPAYER.)

If an individual proves that he has living at the commencement of the year of assessment any child who is receiving full time instruction at an independent school recognised by the Board of Education he shall be entitled in computing his liability to income tax to a

deduction in respect of that child of seventy-five pounds.—[Mr. Hollis.]

Brought up, and read the First time.

7.30 p.m.

Mr. Hollis: I beg to move, "That the Clause be read a Second time."
This new Clause asks, quite frankly, for assistance to independent schools and


to those parents who send their children to independent schools. We can, without great difficulty, make out a case for the justice of some relief being given to those persons because, as is quite obvious, under the present system they pay education bills twice over, in the sense that they have to pay their rates and taxes for the maintenance of the free schools and they have to pay their personal school bills for sending their children to the independent schools. The only argument that could ever have been advanced, if it ever was advanced, against granting them some relief was that Government schools were available for them to make use of if they wished to do so; and if they were such snobs that they were not good enough for them, then they deserved to pay for it.

Mr. Blyton: Hear, hear.

Mr. Hollis: Well, if there ever was a time when it was possible to use that argument, it clearly is not possible to use it at the present moment, because it is notorious that there are not sufficient free schools available, and if all the parents who send their children to independent schools saw fit to, as it were, go on strike and demanded to send their children to the free schools, the educational policy of the Minister of Education would be thrown into complete chaos. Therefore, at this time at any rate, it cannot be pretended that it is in general a voluntary act, whatever it may be in the case of a particular individual, for people to make use of the independent schools.
I should not be content to rest my case on those comparatively negative and narrow grounds. I am prepared, and intend, to argue that the independent schools and the parents who send their children to those schools are performing a function of importance to the whole community which deserves encouragement. In support of that I shall read to the Committee a passage which I read to it some four years ago when discussing a somewhat similar Amendment, where it is said of such people:
Nor is it certain that we shall replace him by a more admirable type.… The leader of the future seems not unlikely to be the remorseless one-idea'd man, who governs us by hewing his way to his goal. He has no time

for the open mind. He takes clemency for weakness and difference of opinion for crime. He has a horror of various civilisation and he means by freedom only a stronger kind of chain. Where we would be peaceful, he calls us to the affirmation of power. For the music of idle dreams he offers us the hum of giant machines. The majesty of the forest is, for him, the volume of a timber supply, the rush of waters in the river the source of electric power. The gentleman scourged us with whips. We must beware lest our new masters drive us to our toil for sport."—[OFFICIAL REPORT, 22nd November, 1945; Vol. 416, c. 1369.]

Viscount Hinchingbrooke: Hear, hear.

Mr. Hollis: My noble Friend might not have said "Hear, hear" so vigorously if he had known that that was a passage from Professor Laski. Is it quite clear that there is a considerable volume of general support for our claim.
If the evidence of Professor Laski is not sufficient, there is the report of the Royal Commission on population, which was published quite recently. We read in that report that "the ordinary economic deterrents to parenthood are aggravated in the higher and upper-medium income ranges by an unfair incidence of taxation. Parents in those income ranges are entitled to such further tax relief as can be justified on the grounds of fiscal equity." It is fairly clear that there is an overwhelming body of support, by no means drawn from people who would vote for hon. Members who sit on these benches, that here is a genuine problem, which must be solved not only in the interests of individuals but in the general national interest.
The Population Commission tells us there are roughly speaking three great demographic problems which this country has to solve if it is to survive. With two of them this particular Clause is not specially concerned. On the one hand we must have sufficient population to replace the numbers and, secondly, there is the problem of the age distribution of the population. This Clause is not directly concerned with those two causes, but in the third place there is the problem of the quality of the population. I myself would not put the problem as one "in crude financial terms," as the Royal Commission would put it. By that quotation they did not do justice to themselves, because elsewhere they show in their report that it is by no means a crude financial problem. This great


problem is sketched out by Sir Cyril Burt, one of the best known living eugenist, who said that first it was on the whole true that ability is hereditary, and, secondly, it is also on the whole true that the most intelligent people have the fewest children. The terrible and obvious and radical conclusion of that is that the population must inevitably get stupider and stupider, and that is the great problem we have to face and take some steps to prevent. Clearly, it will not be prevented by mere rhetoric or by demagogic appeals.
I want clearly to divide my speech into two parts. I am anxious to make it quite clear, first, that here is a very grave problem to be tackled, and then I am willing to be open minded about the particular solution which at the moment we are proposing. I want to make it clear that this is a very great problem, and I do not think there is any doubt that the preservation of the independent schools is a most important national objective. The Commission had no doubt about that at all in their unanimous report. The only reservation to that report was that made by Mrs. Jay. I do not know whether it is hitting below the belt—I have never done it before—to quote an hon. Member's wife against him, and I am not quite sure what is the rule of Privilege on the point, but Mrs. Jay, as hon. Members will know, so far from condemning the independent schools, admitted their quality, and was anxious that their quality should be maintained. Her argument is that they should cease to be fee paying, and should become places where children go as a result of an examination instead of as a result of a parent's income.
7.45 p.m.
Quite frankly I do not myself agree with that. It would be a retrograde step if it was made impossible for parents in any circumstances to benefit their children. I agree with the general verdict of the Commission in regard to a
readiness to incur reasonable financial sacrifices for one's children as an indispensable element in the responsible code of values which must form the basis of a successful population policy.
Nobody has a stronger respect for the free schools than I. I sent my own child to one for a time, and I am very grateful I did so. I was fortunate enough to receive my education at expensive schools but entirely free, and for that

I am extremely grateful, but my education would have suffered if I had had to spend it entirely in the company of people who had won scholarships. On the contrary, it would have become largely valueless had that been so. I would not have had the privilege of being educated alongside the Solicitor-General if that rule had existed, and I would have suffered from many other disadvantages.
We need not pursue the point whether Mrs. Jay's argument is right or wrong, because what we are talking about here is something which should be done here and now. Mrs. Jay herself admits that what she suggests should be done progressively. It is not practical politics or indeed desirable in the present state of the country that the nation should take upon itself the entire burden of maintaining the independent schools. And it is extraordinarily fortunate for the nation that there are parents who are willing to take their share of that burden off the nation's shoulders. Therefore, on Mrs. Jay's admission, on Professor Laski's admission, on Sir Cyril Burr's and on many other people's admission, here is a problem, which must be solved. At the same time it is of vital national importance, that that section of society should survive, which has made contributions to the general well-being of society far beyond the average of its numbers. It can only survive if amongst other things a certain policy of tax relief is followed. That is my first point.
I quite agree that there is plenty of room for differences of opinion as to what is the best form of financial relief. For instance, the Commission itself reports not in favour of helping school bills as such, but of granting Income Tax allowances for people, who have children irrespective of what schools they send them to, and in another part it advocates a scheme to be worked out within industry, by which there shall be larger family allowances granted in accordance with the principle of greater allowances for those with higher incomes, on the ground that as a general rule such people spend more upon their children.
If whoever is to reply for the Government would tell us that the Government will adopt one or other of those policies, certainly I should listen with sympathy to what he says. On the whole I prefer to relieve the education bill rather than the


absolute income. I spoke in favour of increased family allowances before they were granted. The vast majority of parents in every walk of life are extraordinarily unselfish and self-sacrificing towards their children—it is one of the greatest things upon which we can build—and one of the first concerns of the overwhelming majority of parents who have good incomes is to give their children a good education. A small minority who have large incomes do not do their duty in that way but prefer to use their incomes for selfish purposes.
If the allowance is given on the income rather than on the education bill, the people we least wish to benefit are those who will benefit exceptionally under it. Again, when we come to education and educational reform, there is a great deal to be said for the remedy applied by some local education authorities of paying the cost of free places, which the parent does not take up, towards the school bill at an independent school to which he sends his child.
There remains the scheme advocated in the Clause of granting allowances in Income Tax. I am advocating this not because it is the only scheme but because it is the most modest scheme there is and one which would cost the country least. Although this is a time when it is desperately necessary that we should show that we have a policy on this subject, it is also unfortunately a time when it is desperately necessary carefully to count the cost of everything we do, however desirable it may be. It is for that reason that I and my hon. Friends have commended the Clause to the Committee. I do not know what reply we shall get from the Government but the Report of the Royal Commission on Population is published, and it is obvious that it is essential to have a policy on this all-important topic, and to talk about a planned economy when we are planning fiddling and secondary things and have no policy at all about the most important topic of all, which is population, is fantastic.
The lessons of history are alarming. The teaching of Professor Flinders Petrie shows that the general law of history is that when civilisation attains a certain pitch of material comfort, the birth-rate declines and after a time more fecund bar-

barians burst in and overthrow the civilisation. According to mere mathematical probability, that is what is likely to happen to us, and we must face it. If we are talking about a planned economy in a large and sensible sense and not in a mere party sense, we have a great opportunity for the first time in history to avert that. I am not without hope that we may do so, but we cannot do so unless we have a Government with a definite policy on this subject which is incomparably more important than many of the things which fill the controversies of the day.

Mr. Corlett: I generally find myself agreeing with most of what the hon. Member for Devizes (Mr. Hollis) says, but tonight I find it rather difficult to agree with anything that he has said. We should really do better to bring this discussion from population to education. Whatever the hon. Member may think about independent schools—he thinks very highly of them—at least he made it clear that he believes in independent wives. It is clear from what he said that we on this side believe in complete independence on the part of the wives of our own representatives on the Front Bench even on such a joint matter as children.
If the new Clause is accepted we shall encourage parents to regard maintained day schools as quite inferior to the independent schools. That seems inevitable, and it is completely unfair. The hon. Member said that a person was saving the authorities expense when he took his children to private schools and that it was a good sign of liberty in this country that a man could take his children elsewhere to be educated. I am a firm believer in independent schools and I would be no party at any time to wiping them out—it would be a very bad day for this country if we ever pursued such a policy—but that is an entirely different matter from talking about giving financial inducements to parents to send their children to independent schools.
If the parents are dissatisfied with the educational fare provided by the local authority, so long as we are prepared to allow freedom to send children elsewhere, they must be prepared to foot the bill. For 50 years we have been building up an efficient system of State secondary education, and we have made


a remarkably good job of it. It is true that there is plenty to be done yet, but every educationist is astonished at the progress we have made. We have only to realise that for building some of our maintained secondary and modern schools we are paying £300 a place to appreciate what a good job we are doing at least so far as premises are concerned.
It seems to me that we should seek to encourage every parent to desire to take an interest in this State system of education. Surely none of us would want a parent to desire better for his children in education than he is prepared to see every other child get. If we accept this clause we say to a parent, "You need not attend these secondary schools of ours; you can send your children elsewhere and we will help you." Is that the way to encourage parents to take an interest in the schools provided by the local authorities? Our job should be to get every parent interested in the efficiency of the maintained schools. It is not the job of any Government, no matter what its colour, to do anything at any time to lessen the prestige of the maintained schools. This Clause would very definitely lower the prestige of the maintained schools in the eyes of many parents.
But there is something even deeper than prestige, that is, the whole question of boarding education. Before the State should be prepared in any way to finance any expenditure on boarding education, for normal children we ought really to know whether we believe in boarding education. No one has yet been able to determine which normal child should be given a boarding education for educational reasons.

Mr. Lipson: Is not the hon. Member aware that the State is already subsidising boarding education by paying the contributions towards the fees of children sent by local authorities to these schools?

Mr. Corlett: Of course, and I intend to deal with that later. I was saying that no one has yet been able to determine which normal child should be given a boarding education. It is not just a question of day school education versus boarding school education, but of a normal child with a good home, good parents, reasonable accessibility to a good

secondary school and all the benefits a child gets from the give and take of home life and healthy social life, as against education in completely artificial surroundings.
8.0 p.m.
That is the problem, and that is why it is so difficult for any educationist to decide which child shall have a boarding education. Hon. Members will remember that the Fleming Report stressed strongly that one of the most difficult things to do was to decide which child should have a boarding education. I see, too, that the late headmaster of Rugby, Mr. Lyon, made the same statement. In fact he went further and said that it was an insuperable difficulty to select which child from a maintained school should have a boarding education. Hon. Members should be clear that public schools did not become boarding schools because anybody believed that boarding education was superior to that given in day schools. They became boarding schools first for geographical reasons, because the people in the middle of the last century who were doing well out of the industrial revolution wanted schools for their children and there were not good enough schools near their homes. They next came into being for social reasons, because of the prestige connected with them and the prospects they offered for future careers. It is only latterly that there has been any suggestion that even a limited number of them offer boarding education for educational reasons.
There are of course other reasons why some boarding schools give better education—smaller classes, better paid staffs and so on. The difficulty of selection for boarding education is so pronounced that, as the right hon. Member for Saffron Walden (Mr. R. A. Butler) knows, many local education authorities are finding it almost impossible to implement Sections 61 and 76 of his great Education Act. It is a statutory duty on them to provide boarding education, and yet they are rightly running away from it because none of them knows how to select the children and, what is more important, none knows how to reject another child, whose parents desire it, and that is equally important when dealing with public money.
Those egregious Circulars 90 and 120 sent out by the Ministry, and the Administrative Memorandum 225 have completely


failed to persuade education authorities to fill up the 580 places offered last year by the independent boarding schools to children from the maintained schools. And this is almost entirely due to the difficulty of selection. Although I have a great admiration for the right hon. Gentleman, I was always puzzled as to why he set up the Fleming Committee. I could not understand why the Governing Bodies Association suddenly became so powerful. Nobody else asked for that committee to be set up so far as I can remember. It was heavily weighted with boarding school representatives. It is only since the Fleming Report was published that we have had these discussions and are beginning to consider which child should have a boarding education, and still very few of us know.
The hon. Member mentioned Professor Laski, and I thought he used the point effectively. May I draw the attention of the Committee to what happened at the Conservative Teachers' Conference in March, 1948, when they strongly opposed boarding education because it shifted parental responsibility on to the school staff and tended to undermine British home life. Surely the Benches opposite will not support any Clause that will undermine British home life and which will shift the parental responsibility on to school teachers? I often feel that many parents avoid their responsibilities and opportunities by sending their children to boarding schools. I sometimes feel inclined to agree with Karl Mannheim that the justification for a boarding school is to protect a child from the domination of his parents. So on those three counts alone I oppose the Clause and I hope sincerely that public money will never be spent in that way.

Mr. Pickthorn: The hon. Member for York (Mr. Corlett) always debates fairly and I am extremely grateful to the luck of the game and to you, Sir Charles, that I should be called immediately after him. I hope he will not think that I am voluntarily or excessively litigious if I say that I think his general line of argument against boarding schools on two main grounds—first that it is awfully difficult to know which children ought to go to them and, secondly, that anyway they are not in

the main probably good either for the children or the parents—

Mr. Corlett: I did not say that.

Mr. Pickthorn: I am within the recollection of the Committee. I am not trying to parody the hon. Gentleman in any way. I think that was the second part of his argument, that it made him wonder whether family life was not being broken up, and the children presumably suffering in that way, and whether parents were not being deprived of their due responsibilities and enjoyments and opportunities. I think that is fair. At any rate I think that all hon. Members who are in the Committee now were in the Committee when he spoke—

Mr. Corlett: Mr. Corlett rose—

Mr. Pickthorn: And therefore if I have reproduced him unfairly, no substantial injustice will be done. Let me finish this paragraph and then I will give way. I do not think really that his general argument—that is to say, the general argument whether boarding school education is a good thing and, if so, for whom—I do not honestly think that general argument is really relevant to the specific proposal before us, and to that I will return in a second—I will now give way.

Mr. Corlett: I am much obliged to the hon. Gentleman. I was merely putting the view of people who really do know something about this, and who say that we must know more about boarding education and which children should have it before we spend public money.

Mr. Pickthorn: I was not distinguishing between the views of people who really know something about it and the view of the hon. Gentleman; that is a distinction which the Committee owes to him and I think he is doing himself less than justice.
His only other real argument against the thing was that we must not, at any cost, lower the prestige of the State system. I would invite the Committee to consider what a national system of education is for. Is the object of it to produce equality, egalitarianism, uniformity of the population? Is that what the object of the thing is, or is the object to produce as much as possible of as good an education as possible? I quite understand, Sir Charles, that I am


rather begging a question there, the question what is or what is not a good education, but that question must be begged if any of us are to keep within the Rules of Order upon this new Clause. Which of the two is the object?
If the object is not merely the production of uniformity and egalitarianism—and I do not think the hon. Gentleman really meant us to believe that—then the object must be to produce the best education possible. And I would say that we should all be modest about this—and I certainly include myself in the matter. No one of us should be foolish enough to think—indeed it is a complete proof that a man is ill educated if he does think, that there is some one sort of education which is clearly so much better than any other sort that it ought to be the only sort. All I am pleading for is that the beginning of wisdom, after the fear of the Lord, in the educational field is the belief that there ought to be, is sure to be, more than one sort of education. That is all I am asking for.
That is the first step in my argument. The second step in my argument is that it is almost always agreed now, I think, that the independent schools do provide a good sort of education. I do not believe that any candid and informed person would say that on average they produce less good education than the average of the State system. I do not think that any candid and informed person would say that.

Miss Bacon: Is not one of the reasons why the cost of education in our independent schools is so much more is that the size of the classes is so much smaller? And is the hon. Gentleman then saying that the state should give money to help those parents who can afford to give that privileged kind of education?

Mr. Pickthorn: I should hate to get into a bi-sectional argument on this matter, but I really do not understand why the hon. Lady puts that as an intervention rather than as a speech. [Interruption.] If any hon. Gentleman prefers an answer now rather than to make a speech, I do not think the point is a difficult one.
The second point in my argument, which I am trying to put, is that no candid and

informed person denies that the independent schools provide education on the average, at any rate, not noticeably worse than that provided by the State system. That is all I want for the purposes of my argument, and for the purposes of that argument it is wholly irrelevant whether it is because classes are bigger or smaller, endways or sideways or anything else. That is the second point in my argument. But in practice—I should not like to let the hon. Lady think I am being discourteous or not paying attention to the point she has made—I would say to her that all she is doing is strengthening my argument, She is saying that the reason why the independent schools—she appears, apparently, to think—are better, is because the classes are smaller. The object of the new Clause is that persons should not be forced by financial need into the schools where the classes are larger, thereby making them larger still. Therefore, the purpose of her intervention, so far as I see it, cuts entirely against the thesis which, I think, she believes the right one. That is the second point in my argument, that nobody denies that the independent schools provide as much and as good education as the other schools. The first point in my argument was that nobody, I think, denies that there should be variety in education.

Mr. Ralph Morley: Does the hon. Gentleman maintain that there is no variety in the State system of education? There is a great deal of variety between one grammar school and another and between one secondary school and another. There is every scope for variety and choice within the State system of education.

Mr. Pickthorn: I do not say there is no variety in the State system. What I do say is that if there is a single system, we have no guarantee that variety will continue to be allowed. [Interruption.] Certainly, that must clearly be true—it is merely a statement of a truism. That is all I need for the purposes of my argument.
The third step in my argument is that if it is desirable that there should be another system—"system," perhaps, is not a fair word—another nexus or category of schools besides the State system if that is desirable, then it is not right that taxation or rates—fiscal burdens—


should kill them off. I thought, if I may say so, that the hon. Member for York (Mr. Corlett) was really a little less than fair on this point. He said he was all for parents freely sending their children to what are called the independent rather than the maintained schools. He thought they ought to have that alternative and thought it a great argument for the liberty of our country that they are allowed to. Yet he was arguing that parents who do so choose should be punished—I think it is a fair word; at any rate, burdened, have the thing made more difficult for them—by being compelled to pay for the State system as well as paying the charges of the schools which they, rightly or wrongly, prefer.

Mr. Morley: The hon. Gentleman has used the word "compelled." Does he say that anybody is compelled to send their children to the independent schools? Nobody is compelled to do so.

Mr. Pickthorn: Quite honestly, the hon. Gentleman ought really not if I may say so, to intervene on such very slight authority, for this reason: That I did not say that people were compelled to send their children to the maintained schools. [HON. MEMBERS: "Yes, you did."] No; I am within the recollection of the Committee. What I said was, that if parents do what the hon. Member for York commends them for doing as a sign of the freedom of our country—that is to say, send their children to independent schools—they are compelled to pay also the education rate for the other schools. That is what I said, and I think I said it quite plainly, as anyone would know who listened to me carefully—God knows, I don't assume I am worth listening to; but it is not fair for hon. Members to interrupt if they do not bother to listen. That is the third step in my argument.
8.15 p.m.
If each of those three steps is held to be fair, it becomes difficult to resist the new Clause. If it is true that we ought to make sure there is variety in education; if it is true that the main alternative kind of school to the State system is not, in fact, noticeably worse than the State system; if those two things are true, then surely we should not, by our fiscal and administrative arrangements,

make it very difficult indeed for parents to choose that one of the two alternatives. It is difficult anyway, because they have got to pay very heavy fees; but to make it necessary to pay for both sorts of school, in order to take that half of the choice, seems to me to make it very difficult indeed. If the first two steps of my argument are right, then that imposition of difficulty upon the parents who choose the independent rather than the State system seems to me excessive. Therefore, I commend to the Committee the new Clause, which has been so convincingly moved by my hon. Friend the Member for Devizes (Mr. Hollis).

Mr. Gallacher: I just want to say a word or two about the argument put forward by the hon. Member for Cambridge University (Mr. Pickthorn). As it happened, in the Scottish Grand Committee this morning we had a Debate on education, which is a very important subject for the Scottish Grand Committee. The hon. Member began by basing his claim on the ground that if there were not independent schools—fee-paying and boarding schools—we should create a sort of robot type, an egalitarianism, as he called it, with everybody alike. I know a very fine secondary school in my home town. Even if there were not another school in the country, it would have variety. It has turned out large numbers of very capable mathematicians; lads come out proficient in chemistry, in English, in music and the arts. What nonsense to talk about lack of variety because it is not an independent school! Do they teach a different kind of mathematics in the independent school?

Mr. Pickthorn: Only in Marxist schools.

Mr. Gallacher: All this is so much nonsense. I guarantee that in that secondary school, as in others, the finest possible education is being given; none better will be found in any fee-paying or boarding school.
Why do parents send their children to the fee-paying schools and the boarding schools? Is it to get better education? It has nothing to do with education. What the other side want us to do is to subsidise little snobs. [Interruption.] Yes. No justification can be given for the independent and the boarding schools. I do not agree with the hon.


Member for York (Mr. Corlett) about the maintenance of the independent school. I do not think there is any justification now for the maintenance of fee-paying schools. In the Scottish Grand Committee the feeling generally is against such schools. As a matter of fact, in the recent Education Act it was decided to make an inroad into the fee-paying schools and that each of them should take a certain number of ordinary boarding-school children; of course, the fees for those pupils were paid. We have a situation, therefore, where some of the children are being paid for by their parents and others are paid for by the education authority. That is a very undesirable situation. It would be much better to remove fee-paying altogether and to use the schools for children without any distinction whatever.
There are parents who are not prepared to send their children to elementary or secondary schools, where they can get the very best education, but want to send them to a special type of school, although it is not because they will get a better education. Not even the hon. Member the senior Burgess for Cambridge University would make the claim that a better education is obtained in a fee-paying school; he would not even make the claim that as good an education is obtained; he put it in the negative form that it is not any worse than education in the secondary school. That is the argument he put forward. He had not the courage to come out and suggest that it was even—

Mr. Pickthorn: The hon. Member is running a very serious risk; he is running the extremely serious risk of slipping into deviationism if he does not understand that the first rule of dialectic is that one does not at any step in the argument prove more than is necessary to get one on to the next step.

Mr. Gallacher: That is typical of Cambridge—[Interruption]—not agricultural Cambridge but educated Cambridge. I said in the Scottish Grand Committee this morning that I had received a letter from a keen student of 20 years of age, asking me questions. In it he makes the statement, and wishes to know how I stand in regard to it, that Marx advocated the liquidation of the family and was for "the community of women." That is

what he asserted about Marx, an outstanding family man. I will bet any money that that student is from one of the fee-paying educational establishments.
Every encouragement possible should be given to parents, whoever they may be, to send their children to be educated in authority schools and there should be as little discrimination amongst children as possible. The taking away of certain groups and placing them apart from the rest will never be helpful. I strongly urge, if any urging be needed, that the Minister reject this new Clause.

Commander Maitland: I think that my hon. Friend the senior Burgess for Cambridge University (Mr. Pickthorn) said that the hon. Member for West Fife (Mr. Gallacher) was in danger of deviation. I believe that that danger is really serious. My hon. Friend the Member for Devizes (Mr. Hollis) has just handed me a note quoting a letter from Karl Marx to Engels, in which he said:
It would be against their interests—
that is, Marx's children—
that they should be brought up as proletarians considering the circles in which they move.
I do not want to be brought into this battle, but I can introduce the hon. Member to my hon. Friend, and they can go into the matter afterwards. If that is true, the hon. Member had indeed better look out.

Mr. Gallacher: Will hon. Members on the other side of the Committee, particularly the hon. Member for Devizes, advise me to accept without demur everything said or written by Karl Marx?

Commander Maitland: It seems to me that an enormous part of the world accepts what he said as gospel truth, and it would be an extraordinarily good thing if they did not do so.
I should like to deal rather more seriously with the argument of the hon. Member for York (Mr. Corlett). I am afraid that he has not really read this new Clause as carefully as he might have done. Had he done so, he would have seen that the amount which would accrue to the parent who claimed the exemption asked for, would not in any way meet the full fees of an independent school. I do not claim that this new Clause is in any


way perfect, and it can obviously be improved; but all that we are asking is that the educational fees should be met, and not necessarily, or not at all, the maintenance fees. The hon. Member for York entered into an argument about boarding schools and day schools. That is entirely beside the point; it has nothing to do with the new Clause.
It is of great help to the Committee that we have had the Report on Population so recently published. I would remind the Committee that all the well-known national newspapers greeted that Report with extreme interest. They all commented on it and applauded it for its realism. I agree, and I would like to quote part of that Report, to which the majority agreed, to try to prove that point of realism. The Royal Commission say:
More and more parents have been willing to incur the cost involved in these forms of education"—
that is, the form to which we are now referring—
because in general they give to their children considerable advantages in after life.
Let us have no nonsense about it; that is true.
To secure these advantages many parents have to make real sacrifices, to the point sometimes of cutting down expenditure on their food and other essentials of health. There is here a strong motive for restricting the number of children to be educated, since the fewer the children in the family the more can be spent on educating them and preparing them for a career; and it is not surprising that amongst responsible and intelligent parents this is one of the most commonly stated reasons for keeping the family very small.
That is a realistic approach, and whether we like it or not most of us would agree that in our innermost hearts it is true. But there are many families who, even though they have the minimum family of one, even though they themselves went to independent schools, and perhaps their fathers before them—officers serving in the Army or Navy, clergymen, junior Ministers and professional men of all sorts—simply cannot afford to send their children to an independent school. It is for this reason that we are asking the Committee to support this new Clause.
8.30 p.m.
I listened last week with interest to the rather virulent speech of the hon. Member for East Coventry (Mr. Crossman).

It was a very good Parliamentary performance. I did not agree with it, but it was, as is always the case with the speeches of the hon. Member, a well-delivered speech. He said, and he placed tremendous emphasis on it, that we can, and we must, afford education. I believe that we must do that, and I entirely agree with the hon. Gentleman on that particular point. It would be quite wrong, simply because they cannot afford it, to deny to the professional men and women in this country today this form of education which they desire and which the Report on Population indicates that they desire. This particular difficulty is recognised by many local authorities which make a grant in aid, perhaps with certain stipulations, to parents of children educated at independent schools, and I believe that the Ministry have recently turned down proposals by local education authorities to make these grants. I do not think that is right. Personally, I prefer the system of grants, because I think it would be economically fairer, but now is not the time to do it, and in any case it would need legislation and would take time to have any effect. That is the main reason why I believe this new Clause meets the point, because it does something at once and there is very definite evidence that something is needed at once.
One of the most astonishing anomalies is that, now that we have the Socialist Party in power, the value of being wealthy has never been so apparent as it is at the present moment in regard to education. It is only the really rich man who can afford to educate his children at these schools. The people of this country are not getting the best value from the public schools, and, therefore, the man of moderate means has to restrict his family and has to pinch in order to give his child the education which he chooses, or has to use his capital to have his children educated. I am quite certain that that principle is not one with which the party opposite agree, and it really is astonishing that there is at the moment a set of circumstances which deliberately gives the wealthy an advantage in this particular field.
If this new Clause is agreed to, many more people would be able to send their children to the public schools, and there would be more competition. There is


already enormous competition for the public schools, but there are far too many rich people sending their children there, and this new Clause would enable the serving officer and other professional men to send their children to the public schools. I emphasise the great importance of the point which has already been made about the congestion in the secondary grammar schools. There is at present an enormous desire to send children to these schools, and in many cases there would be a speedier dispersal of this congestion if we were to accept the new Clause.
Finally, I think it is quite monstrous that, when we have a tried and valued system of education in this country, as we have in the independent schools, and when we have a system which has not done so badly—in spite of what was said by the hon. Member for York, they have produced very fine men and women, and will continue to do so—it is quite wrong not to use that great educational weapon to the best advantage. At the moment, it is not being used to the best advantage, and one of the objects of this new Clause is to see that we make the best use of the independent system.

Mr. Jay: I must say that I am entirely unimpressed by the arguments advanced by hon. Members opposite, including the argument of the hon. Member for Devizes (Mr. Hollis), who said that the electorate were getting stupider and stupider. We do not accept that at all.
The position at the moment is that Income Tax payers get an allowance of £60 in respect of every child. What this new Clause apparently proposes is that they shall get a further £75 in the case of any child going to an independent school. They apparently would get that relief whether or not the parent paying the Income Tax was actually bearing the cost of the fees. The principle in Income Tax has always been that a flat rate deduction is granted in virtue of the existence of the dependant, whether it be a child or some other dependant. What is now proposed is that we shall get away from that and grant relief in virtue of a particular form of expenditure in which the Income Tax payer chooses to indulge. It seems to me that, as soon as we accept that principle, we get into all sorts of difficulties.
In the first place, expenditure on education is not the only form of expenditure. There are many other forms which people may have to meet, and I have no doubt that eloquent speeches could be made on their claims for Income Tax relief. Furthermore, there is a particular disadvantage involved in this new Clause in that it is proposed that we should give relief for a form of expenditure which is discretionary or voluntary and the Income Tax payer does not have to embark upon unless he chooses. I think it would create a very difficult position if the Government or the Treasury granted relief in virtue of a voluntary form of expenditure and refused it for other forms of expenditure which the tax-payer is bound to meet—for instance, rent and many other things we could think of.
When the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) was Chancellor of the Exchequer and was presented with a proposal like this in the Finance Bill Debates of 1944, I think it was, he stated the argument and summed it up in these words, with which I entirely agree:
I am bound to say to the Committee that, whatever the case may be for making provision which will bring higher or special educacational facilities more effectively within the reach of people in all classes of the community, this is not the appropriate way to do it."—[OFFICIAL REPORT, 15th June, 1944; Vol. 400, c. 2193.]
That was the right hon. Gentleman the Member for the Scottish Universities.
There is also, surely, an added, overwhelming objection to this proposal and it has been stated by my hon. Friend the Member for York (Mr. Corlett). It is, of course, the case that certain parents choose to spend money on purchasing what they regard as special educational facilities for their children. That is a fact. I am not now arguing whether those educational privileges are real or whether or not it is a good society in which people are enabled to buy those privileges for their own children. One could argue a great deal on that, but I am not taking a view on it now. I do, however, agree with my hon. Friend that it certainly would be entirely wrong and, indeed, fantastic that the State should subsidise people in order that they could do so, and the position would be anomalous in the extreme, because it is only if they already had a large enough


income to afford to pay these fees in the first place that they would come into the privileged class which would then get the relief. We should, therefore, be introducing into Income Tax a form of relief not for the person with the lower income but for the individual with the higher income.

Mr. Leslie Hale: In order that I might not have to intervene later in the Debate, would my hon. Friend also be good enough to confirm what is the position in my constituency—that there are many scholarship pupils at independent schools paid for by the State and that these people would get a subsidy, as against the parents of similar students at the other schools?

Mr. Jay: Certainly, that would be the case. It, therefore, seems to me that if we had this money to spend on education it would be far better to spend it on improving and increasing the facilities at the State schools. If the hon. Member for Devizes is right in saying that there are insufficient places now available in the State schools so that people are induced to send their children elsewhere, then this money should be spent on improving and increasing the facilities in the State schools.
The senior Burgess for Cambridge University (Mr. Pickthorn) asked what was the purpose of our educational system. Was it, he asked, to establish some sort of formal egalitarianism? I would say, quite simply, that presumably it is to establish equality of opportunity. Surely that is what we are after. I am not sure whether he would understand that, but I think it is the first thing we are seeking. Secondly, we are surely seeking to see that the best education is given to those who are best fitted to take advantage of it. I am not sure that he would understand that either. But we shall not do that by making our selection according to the income of the child's parents and not according to the ability of the child.
Finally, it is not a small sum that we are discussing here. This relief would amount to about £10 million a year. If we adopted this Amendment, therefore, in effect we should be diverting £10 million from the improvement of the State schools for the great mass of the children of the community, to paying this

subsidy to certain classes to enable them to buy special educational facilities for themselves. I am quite sure the Income Tax should not be used for any purpose of that kind, and I really feel that this Amendment shows how completely hostile are the Tory Party to the whole idea of equality.

Mr. R. A. Butler: I had not intended to take part in the Debate had not the Economic Secretary made these purely class remarks at the end of his speech. I think we have had quite enough of those in the course of our Debates. The standard of the Debate before the hon. Gentleman rose was uniformly high and was devoted to educational subjects. The hon. Gentleman opened his speech with a reference to the next election, taking advantage of a statement made on this side that the electorate was no longer intelligent—or some such remark—and attempted at the end of his speech to import into the argument a purely class argument which I have always believed it right to keep out of education. I do not believe we can decide any educational issue in this country if we are obsessed with the class question. Nor do I think we can decide any educational question of this kind if we refer to snob values or anything of that sort.

Mr. Jay: May I ask the right hon. Gentleman whether he regards it as a class issue to say that we believe in equality of opportunity?

Mr. Butler: No. I referred only to the opening and closing portions of the hon. Gentleman's speech, and if he will allow me to continue my very short speech he will be surprised to find that I have something quite agreeable to say about certain other parts of his argument. Perhaps he will allow me now to continue my very short speech? When deciding educational issues, for goodness sake do not let us decide them on a class basis. Let us realise that many Members of this Committee have attempted to keep education out of the clash of party politics in the course of this Parliament. Personally, I do not intend to be dragged away from that determination, which I share; and although I do not agree with everything this Government have done in education, I do agree that they are in general attempting to carry out the spirit of the 1944 Act. On that understanding I have


no desire to drag this matter any lower than it need be dragged in the ordinary cut and thrust of Debate.
As to this particular issue, I am very glad my hon. Friends have raised it, because there is behind it a very serious problem. Whether we like it or not, we have to face the fact that in 1944 we all agreed that the independent schools were an integral part of education in this country. Reference to them forms a part of the Act. I am particularly glad that the Minister of Education has decided to put into force inspection of those schools, because without inspection of those schools we can have no certainty about standards. We also have to face the fact that, unfortunately, the State system is very much over-crowded. One of the great problems of the day, which has been a problem for several years, is the question of the overloading of the size of classes, which makes it quite impossible to establish that relationship of teacher to taught which is the only basis of all true education. In this respect the independent schools are very valuable as an addition to the education provision in this country.
The hon. Member for York (Mr. Corlett) raised a very important point. He talked with regret of the inability to link up the local authorities and the pupils they can find, with the boarding school system of this country. I believe that that is a most unfortunate thing. I have always believed that what we call the public schools, what we call the small preparatory schools, should try to link themselves up with the State system, and the pupils coming from the State system should by any method that can be devised, be admitted to them, which would build a bridge between these two sections of the educational provision in the country.
From the point of view of education it would be a great pity to reduce the standard of the independent schools, and from the point of view of the country it would be intensely valuable to have as many people as possible entering the independent schools and taking advantage of them. I therefore hope that, whether or not this Clause can be accepted by the Government, some solution can be found of this problem—that with the very heavy tax burden today those people who have been using the independent schools are finding it very difficult to send their children to those schools. Looking at it

educationally, there is some chance that these schools will not receive the support they deserve. In some way a solution has to be found by this country whereby we link up the various types of education, whereby we do not destroy any good school that has a good form of education, and whereby our people may take advantage of whatever provision is most suitable to each child's individual character.
8.45 p.m.
Looking at the terms of the new Clause, I think there is a lot in what the hon. Gentleman says about the use of the Income Tax law. There are certain traditions behind the Income Tax law, and it would be very difficult to go against them. I am aware of the answer given by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) when he was Chancellor of the Exchequer. I have studied this subject very closely, and I personally think that it would be very difficult to find an easy solution on the lines proposed. Nevertheless, I would appeal to the hon. Gentleman, who is obviously interested in education and has a fine educational record himself, to investigate whether any other solution can be found which is equitable to all concerned. I would only add that the Preparatory Schools Association and the Headmasters' Conference have both been very exercised about this matter. At some date, no doubt, they will be making their own official representations to the Government. They have already been in touch with the Ministry of Education, and when their official representatives meet the hon. Gentleman's colleagues, perhaps he will encourage them to find some solution which can be regarded as entirely equitable to all concerned. I do not think it will be easy.
I would make one further observation about this new Clause. In the discussions on the Education Act we laid down that it was impossible for the State to pay for a whole-time type of education given independently of the State schools. The taxpayer could not bear that particular burden. This encouraged a crisis with the Roman Catholic community, but I was obliged for reasons of principle to stick to my guns, and the House of Commons supported me at that time. My hon. Friends may feel inclined to take


their views as far as they like, but in view of the position that I have been in on the education Debates, I do not think it would be right in principle to allot State money to a section of the population for a particular type of education, although I think in equity there is a case for so doing, because in equity it is possible to say that if a person takes his child out of the State system and yet pays taxes for the State system he should be rewarded.
Tonight, without the whole knowledge of experts behind me and without the resources which are at the disposal of the Economic Secretary, I cannot find an absolutely certain solution to this problem. It may work out in the form of some sort of children's allowance; it may work out in some other way; but I wish to say that I hope we shall continue to decide educational matters in this House without regard to snob issues or social considerations, that we shall not think

that education is a tool which can alter society. I believe that education normally in most countries reflects the society which exists at the time. English society is in process of change and we are moving into a new period. At the same time, in this change I sincerely trust that the very high standards of the independent schools will be preserved, that a link may be built up between them and the State system, and that the Government, if they are approached by sincere and devoted bodies on behalf of these schools, will give their representations every consideration.

The Parliamentary Secretary to the Treasury (Mr. Whiteley): The Parliamentary Secretary to the Treasury (Mr. Whiteley) rose in his place, and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 274; Noes, 125.

Division No. 186.]
AYES
[8.50 p.m.


Acland, Sir Richard
Collindridge, F.
Grey, C. F.


Adams, Richard (Balham)
Collins, V. J.
Grierson, E.


Albu, A. H.
Colman, Miss G. M.
Griffiths, D. (Rother Valley)


Allen, A. C. (Bosworth)
Cook, T. F.
Griffiths, Rt. Hon. J. (Llanelly)


Alpass, J. H.
Cooper, G.
Griffiths, W. D. (Moss Side)


Attewell, H. C.
Corbet, Mrs. F. K. (Camb'well, N. W.)
Guest, Dr. L. Haden


Austin, H. Lewis
Corlett, Dr. J.
Gunter, R. J.


Awbery, S. S.
Cove, W. G.
Guy, W. H.


Ayles, W. H.
Crawley, A.
Haire, John E. (Wycombe)


Ayrton Gould, Mrs. B.
Crossman, R. H. S.
Hale, Leslie


Bacon, Miss A.
Cullen, Mrs.
Hall, Rt. Hon. Glenvil


Baird, J.
Daggar, G.
Hamilton, Lieut.-Col. R.


Balfour, A.
Daines, P.
Hannan, W. (Maryhill)


Barnes, Rt. Hon. A. J.
Davies, Edward (Burslem)
Hardy, E. A.


Barstow, P. G.
Davies, Ernest (Enfield)
Hastings, Dr. Somerville


Barton, C.
Davies, Harold (Leek)
Haworth, J.


Battley, J. R.
Davies, Haydn (St. Pancras, S. W.)
Henderson, Joseph (Ardwick)


Bechervaise, A. E.
Davies, R. J. (Westhoughton)
Herbison, Miss M.


Benson, G.
Davies, S. O. (Merthyr)
Hewitson, Capt. M.


Berry, H.
Deer, G.
Hobson, C. R.


Beswick, F.
Delargy, H. J.
Holman, P.


Binns, J.
Diamond, J.
Holmes, H. E. (Hemsworth)


Blackburn, A. R.
Dobbie, W.
Horabin, T. L.


Blenkinsop, A.
Dodds, N. N.
Houghton, A. L. N. D. (Sowerby)


Blyton, W. R.
Driberg, T. E. N.
Hoy, J.


Bowden, Flg. Offr. H. W.
Dugdale, J. (W Bromwich)
Hubbard, T.


Braddock, Mrs. E. M. (L'pl, Exch'ge)
Dye, S.
Hudson, J. H. (Ealing, W.)


Braddock, T. (Mitcham)
Evans, Albert (Islington, W.)
Hughes, Emrys (S. Ayr)


Bramall, E. A.
Evans, E. (Lowestoft)
Hughes, Hector [Aberdeen, N.)


Brook, D. (Halifax)
Evans, John (Ogmore)
Hughes, H. D. (W'lverh'ton, W.)


Brooks, T. J. (Rothwell)
Evans, S. N. (Wednesbury)
Hynd, J. B. (Attercliffe)


Broughton, Dr. A. D. D.
Ewart, R.
Irving, W. J. (Tottenham, N.)


Brown, George (Belper)
Fairhurst, F.
Isaacs, Rt. Hon. G. A.


Brown, T. J. (Ince)
Farthing, W. J.
Jay, D. P. T.


Bruce, Maj. D. W. T.
Fernyhough, E.
Jeger, G. (Winchester)


Burke, W. A.
Follick, M.
Jeger, Dr. S. W. (St. Pancras, S. E.)


Butler, H. W. (Hackney, S.)
Foot, M. M.
Jenkins, R. H.


Callaghan, James
Forman, J. C.
John, W.


Carmichael, James
Fraser, T. (Hamilton)
Jones, Rt. Hon. A. C. (Shipley)


Champion, A. J.
Gaitskell, Rt. Hon. H. T. N.
Jones, D. T. (Hartlepool)


Chetwynd, G. R.
Ganley, Mrs. C. S.
Jones, Elwyn (Plaistow)


Cluse, W. S.
Gibbins, J.
Jones, J. H. (Bolton)


Cobb, F. A.
Gibson, C. W.
Keenan, W.


Cocks, F. S.
Gilzean, A.
Key, Rt. Hon. C. W.


Coldrick, W.
Glanville, J. E. (Consett)
Kinley, J.


Collick, P.
Gordon-Walker, P. C.
Kirby, B. V.




Lang, G.
Oliver, G. H.
Sorensen, R. W.


Lavers, S.
Orbach, M.
Soskice, Rt. Hon. Sir Frank


Lee, F. (Hulme)
Paget, R. T.
Sparks, J. A.


Leonard, W.
Paling, Will T. (Dewsbury)
Stubbs, A. E.


Leslie, J. R.
Palmer, A. M. F.
Sylvester, G. O.


Levy, B. W.
Pargiter, G. A.
Symonds, A. L.


Lewis, J. (Bolton)
Parker, J.
Taylor, R. J. (Morpeth)


Lewis, T. (Southampton)
Parkin, B. T.
Thomas, D. E. (Aberdare)


Lindgren, G. S.
Paton, Mrs. F. (Rusholiffe)
Thomas, George (Cardiff)


Logan, D. G.
Paton, J. (Norwich)
Thomas, I. O. (Wrekin)


Longden, F.
Pearson, A.
Thomas, John R. (Dover)


Lyne, A. W.
Peart, T. F.
Thorneycroft, Harry (Clayton)


McAdam, W.
Poole, Cecil (Liohfield)
Thurtle, Ernest


McAllister, G.
Popplewell, E.
Timmons, J.


McEntee, V. La T.
Porter, E. (Warrington)
Titterington, M. F.


McGhee, H. G.
Porter, G. (Leeds)
Tolley, L.


McGovern, J.
Proctor, W. T.
Tomlinson, Rt. Hon. G.


Mack, J. D.
Pryde, D. J.
Turner-Samuels, M.


McKay, J. (Wallsend)
Pursey, Comdr. H.
Ungoed-Thomas, L.


McKinlay, A. S.
Randall, H. E.
Vernon, Maj. W. F.


McLeavy, F.
Ranger, J.
Walker, G. H.


MacPherson, Malcolm (Stirling)
Rankin, J.
Warbey, W. N.


Macpherson, T. (Romford)
Rees-Williams, D. R.
Watkins, T. E.


Mainwaring, W. H.
Reid, T. (Swindon)
Webb, M. (Bradford, C.)


Mallalieu, J. P. W. (Huddersfield)
Rhodes, H.
Wells, P. L. (Faversham)


Mann, Mrs. J.
Ridealgh, Mrs. M.
West, D. G.


Manning, C. (Camberwell, N.)
Robens, A.
Wheatley, Rt. Hon. John (Edinb'gh, E.)


Marquand, Rt. Hon. H. A.
Rober's, Goronwy (Caernarvonshire)
White, H. (Derbyshire, N. E.)


Mathers, Rt. Hon George
Robertson, J. J. (Berwick)
Whiteley, Rt. Hon. W.


Mellish, R. J.
Robinson, Kenneth (St. Pancras, N.)
Wigg, George


Messer, F.
Rogers, G. H. R.
Wilcock, Group-Capt. C. A. B.


Middleton, Mrs. L.
Ross, William (Kilmarnock)
Wilkes, L.


Moody, A. S.
Royle, C.
Wilkins, W. A.


Morley, R.
Sargood, R.
Willey, F. T. (Sunderland)


Morris, Lt.-Col. H. (Sheffield, C.)
Scollan, T.
Williams, D. J. (Neath)


Morris, P. (Swansea, W.)
Scott-Elliot, W.
Williams, J. L. (Kelvingrove)


Mort, D. L.
Shackleton, E. A. A.
Williams, Ronald (Wigan)


Moyle, A.
Sharp, Granville
Williams, Rt. Hon. T. (Don Valley)


Murray, J. D.
Shurmer, P.
Williams, W. R. (Heston)


Nally, W.
Silkin, Rt. Hon. L.
Willis, E.


Naylor, T. E.
Silverman, J. (Erdington)
Wills, Mrs. E. A.


Neal, H. (Claycross)
Silverman, S. S. (Nelson)
Woodburn, Rt. Hon. A.


Nichol, Mrs. M. E. (Bradford, N.)
Simmons, C. J.
Yates, V. F.


Nicholls, H. R. (Stratford)
Skeffington-Lodge, T. C.



Noel-Baker, Rt. Hon. P. J. (Derby)
Skinnard, F. W.
TELLERS FOR THE AYES:


Noel-Buxton, Lady
Smith, C. (Colchester)
Mr. Snow and Mr. George Wallace.


Oldfield, W. H.
Smith, S. H. (Hull, S. W.)





NOES


Agnew, Cmdr. P. G.
George, Lady M. Lloyd (Anglesey)
Marlowe, A. A. H.


Amory, D. Heathcoat
Glyn, Sir R.
Marples, A. E.


Assheton, Rt. Hon. R.
Gomme-Duncan, Col. A.
Maude, J. C.


Astor, Hon. M.
Grimston, R. V.
Mellor, Sir J.


Baldwin, A. E.
Hannon, Sir P. (Moseley)
Morris, Hopkin (Carmarthen)


Beamish, Maj. T. V. H.
Harden, J. R. E.
Morrison, Rt. Hon. W. S. (Cirencester)


Birch, Nigel
Harris, F. W. (Croydon, N.)
Mott-Radclyffe, C. E.


Boles, Lt.-Col. D. C. (Wells)
Harvey, Air-Comdre. A. V.
Neven-Spence, Sir B.


Bower, N.
Headlam Lieut.-Col. Rt. Hon. Sir C.
Noble, Comdr. A. H. P.


Boyd-Carpenter, J. A.
Hinchingbrooke, Viscount
Nutting, Anthony


Braithwaite, Lt.-Comdr. J. G.
Hogg, Hon. Q.
Odey, G. W.


Buchan-Hepburn, P. G. T.
Hollis, M. C.
O'Neill, Rt. Hon. Sir H.


Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)
Howard, Hon. A.
Osborne, C.


Challen, C.
Hudson, Rt. Hon. R. S. (Southport)
Peaks, Rt. Hon. O.


Clarke, Col. R. S.
Hurd, A.
Peto, Brig. C. H. M.


Conant, Maj. R. J. E.
Hutchison, Lt.-Cm. Clark (E'b'rgh W.)
Pickthorn, K.


Cooper-Key, E. M.
Hutchison, Col. J. R. (Glasgow, C.)
Ponsonby, Col. C. E.


Corbett, Lieut.-Col. U. (Ludlow)
Jeffreys, General Sir G.
Prior-Palmer, Brig. O.


Crookshank, Capt. Rt. Hon. H. F. C.
Joynson-Hicks, Hon. L. W.
Raikes, H. V.


Crosthwaite-Eyre, Col. O. E.
Kendall, W. D.
Rayner, Brig. R.


Cuthbert, W. N.
Kerr, Sir J. Graham
Renton, D.


Darling, Sir W. Y.
Langford-Holt, J.
Roberts, Emrys (Merioneth)


Digby, Simon Wingfield
Law, Rt Hon. R. K.
Roberts, W. (Cumberland, N.)


Dodds-Parker, A. D.
Lennox-Boyd, A. T.
Robertson, Sir D. (Streatham)


Dugdale, Maj. Sir T. (Richmond)
Linstead, H. N.
Robinson, Roland (Blackpool, S.)


Duthie, W. S.
Lipson, D. L.
Ropner, Col. L.


Erroll, F. J.
Lloyd, Selwyn (Wirral)
Ross, Sir R. D. (Londonderry)


Fletcher, W. (Bury)
Low, A. R. W.
Sanderson, Sir F.


Fox, Sir G.
Lucas-Tooth, Sir H.
Savory, Prof. D. L.


Fraser, Sir I. (Lonsdale)
MacAndrew, Col. Sir C.
Scott, Lord W.


Fyfe, Rt. Hon. Sir D. P. M.
Macdonald, Sir P. (I. of Wight)
Shephard, S. (Newark)


Gage, C.
McFarlane, C. S.
Smiles, Lt.-Col. Sir W.


Galbraith, Cmdr. T. D. (Pollok)
Maclean, F. H. R. (Lancaster)
Snadden, W. M.


Galbraith, T. G. D. (Hillhead)
Maitland, Comdr. J. W.
Spearman, A. C. M.







Stanley, Rt. Hon. O.
Thomas, J. P. L. (Hereford)
White, J. B. (Canterbury)


Stewart, J. Henderson (Fife, E.)
Thornton-Kemsley, C. N.
Williams, C. (Torquay)


Strauss, Henry (English Universities)
Thorp, Brigadier R. A. F.
Williams, Gerald (Tonbridge)


Stuart, Rt. Hon. J. (Moray)
Touche, G. C.
Winterton, Rt. Hon. Earl


Studholme, H. G.
Turton, R. H.
York, C.


Sutcliffe, H.
Wadsworth, G.



Taylor, C. S. (Eastbourne)
Wakefield, Sir W. W.
TELLERS FOR THE NOES:


Teeling, William
Walker-Smith, D.
Mr. Drewe and


Thomas, Ivor (Keighley)
Wheatley, Colonel M. J. (Dorset, E.)
Brigadier Mackeson

Question put accordingly, "That the Clause be read a Second time."

The Committee divided: Ayes, 112; Noes, 280.

Division No. 187.]
AYES
[9.0 p.m.


Agnew, Cmdr. P. G.
Hogg, Hon. Q.
Rayner, Brig. R.


Amory, D. Heathcoat
Howard, Hon. A.
Renton, D.


Astor, Hon. M.
Hudson, Rt. Hon. R. S. (Southport)
Robertson, Sir D. (Streatham)


Baldwin, A. E.
Hurd, A.
Robinson, Roland (Blackpool, S.)


Beamish, Maj. T. V. H.
Hutchison, Lt.-Cm. Clark (E'b'rgh W.)
Ropner, Col. L.


Boles, Lt.-Col. D. C. (Wells)
Hutchison, Col. J. R. (Glasgow, C.)
Ross, Sir R. D. (Londonderry)


Bower, N.
Jeffreys, General Sir G.
Sanderson, Sir F.


Boyd-Carpenter, J. A.
Joynson-Hicks, Hon. L. W.
Savory, Prof. D. L.


Braithwaite, Lt.-Comdr. J. G.
Keeling, E. H.
Scott, Lord W.


Buchan-Hepburn, P. G. T.
Kerr, Sir J. Graham
Shephard, S. (Newark)


Channon, H.
Langford-Holt, J.
Smiles, Lt.-Col. Sir W.


Clarke, Col. R. S.
Law, Rt Hon. R. K.
Snadden, W. M.


Conant, Maj. R. J. E.
Linstead, H. N.
Spearman, A. C. M.


Cooper-Key, E. M.
Lipson, D. L.
Stewart, J. Henderson (Fife, E.)


Corbett, Lieut.-Col. U. (Ludlow)
Lloyd, Selwyn (Wirral)
Strauss, Henry (English Universities)


Crosthwaite-Eyre, Col. O. E.
Low, A. R. W.
Stross, Dr. B.


Cuthbert, W. N.
Lucas-Tooth, Sir H.
Stuart, Rt. Hon. J. (Moray)


Darling, Sir W. Y.
MacAndrew, Col. Sir C.
Studholme, H. G.


Digby, Simon Wingfield
McCallum, Maj. D.
Sutcliffe, H.


Dodds-Parker, A. D.
Macdonald, Sir P. (I. of Wight)
Taylor, C. S. (Eastbourne)


Drewe, C.
McFarlane, C. S.
Teeling, William


Dugdale, Maj. Sir T. (Richmond)
Mackeson, Brig. H. R.
Thomas, Ivor (Keighley)


Duthie, W. S.
Maclean, F. H. R. (Lancaster)
Thomas, J. P. L. (Hereford)


Erroll, F. J.
Marlowe, A. A. H.
Thorneycroft, G. E. P. (Monmouth)


Fletcher, W. (Bury)
Marples, A. E.
Thornton-Kemsley, C. N.


Fox, Sir G.
Maude, J. C.
Thorp, Brigadier R. A. F.


Fraser, Sir I. (Lonsdale)
Mellor, Sir J.
Touche, G. C.


Gage, C.
Mott-Radclyffe, C. E.
Turton, R. H.


Galbraith, Cmdr. T. D. (Pollok)
Neven-Spence, Sir B.
Wakefield, Sir W. W.


Galbraith, T. G. D. (Hillhead)
Noble, Comdr. A. H. P.
Walker-Smith, D.


Glyn, Sir R.
Nutting, Anthony
Wheatley, Colonel M. J. (Dorset, E.)


Gomme-Duncan, Col. A.
Odey, G. W.
White, J. B. (Canterbury)


Hannon, Sir P. (Moseley)
O'Neill, Rt. Hon. Sir H.
Williams, C. (Torquay)


Harden, J. R. E.
Osborne, C.
Williams, Gerald (Tonbridge)


Harris, F. W. (Croydon, N.)
Peto, Brig. C. H. M.
Winterton, Rt. Hon Earl


Harvey, Air-Comdre. A. V.
Pickthorn, K.
York, C.


Headlam Lieut.-Col. Rt. Hon. Sir C.
Poole, O. B. S. (Oswestry)



Henderson, John (Cathcart)
Prior-Palmer, Brig. O.
TELLERS FOR THE AYES:


Hinchingbrooke, Viscount
Raikes, H. V.
Commander Maitland and




Mr. Hollis.




NOES


Acland, Sir Richard
Blyton W. R.
Colman, Miss G. M.


Adams, Richard (Balham)
Bowden, Flg. Offr. H. W.
Cook, T. F.


Albu, A. H.
Braddock, Mrs. E. M. (L'pl. Exch'ge)
Cooper, G.


Allen, A. C. (Bosworth)
Braddock, T. (Mitcham)
Corbet, Mrs. F. K. (Camb'well, N. W.)


Alpass, J. H.
Bramall, E. A.
Corlett, Dr. J.


Attewell, H. C.
Brook, D. (Halifax)
Cove, W. G.


Austin, H. Lewis
Brooks, T. J. (Rothwell)
Crossman, R. H. S.


Awbery, S. S.
Broughton, Dr. A. D. D.
Cullen, Mrs.


Ayles, W. H.
Brown, George (Belper)
Daggar, G.


Ayrton Gould, Mrs. B.
Brown, T. J. (Ince)
Daines, P.


Bacon, Miss A.
Bruce, Maj. D. W. T.
Davies, Edward (Burslem)


Baird, J.
Burke, W. A.
Davies, Ernest (Enfield)


Balfour, A.
Butler, H. W. (Hackney, S.)
Davies, Harold (Leek)


Barnes, Rt. Hon. A. J.
Callaghan, James
Davies, Haydn (St. Pancras, S. W.)


Barstow, P. G.
Carmichael, James
Davies, R. J. (Westhoughton)


Barton, C.
Champion, A. J.
Davies, S. O. (Merthyr)


Battley, J. R.
Chetwynd, G. R.
Deer, G.


Bechervaise, A. E.
Cluse, W. S.
Delargy, H. J.


Benson, G.
Cobb, F. A.
Diamond, J.


Berry, H.
Cocks, F. S.
Dobbie, W.


Beswick, F.
Coldrick, W.
Dodds, N. N.


Binns, J.
Collick, P.
Driberg, T. E. N.


Blackburn, A. R.
Collindridge, F.
Dugdale, J. (W. Bromwich)


Blenkinsop, A.
Collins, V. J.
Dye, S.




Evans, Albert (Islington, W.)
Lee, F. (Hulme)
Rhodes, H.


Evans, E. (Lowestoft)
Leonard, W.
Ridealgh, Mrs. M.


Evans, John (Ogmore)
Leslie, J. R.
Robens, A.


Evans, S. N. (Wednesbury)
Levy, B. W.
Roberts, Emrys (Merioneth)


Ewart, R.
Lewis, J. (Bolton)
Roberts, Goronwy (Caernarvonshire)


Fairhurst, F.
Lewis, T. (Southampton)
Roberts, W. (Cumberland, N.)


Farthing, W. J.
Lindgren, G. S.
Robertson, J. J. (Berwick)


Fernyhough, E.
Logan, D. G.
Robinson, Kenneth (St. Pancras, N.)


Follick, M.
Longden, F.
Rogers, G. H. R.


Foot, M. M.
Lyne, A. W.
Ross, William (Kilmarnock)


Forman, J. C.
McAdam, W.
Royle, C.


Fraser, T. (Hamilton)
McAllister, G.
Sargood, R.


Gaitskell, Rt. Hon. H. T. N.
McEntee, V. La T.
Scollan, T.


Gallacher, W.
McGhee, H. G.
Scott-Elliot, W.


Ganley, Mrs. C. S.
McGovern, J.
Shackleton, E. A. A.


George, Lady M. Lloyd (Anglesey)
Mack, J. D.
Sharp, Granville


Gibbins, J.
McKay, J. (Wallsend)
Shurmer, P.


Gibson, C. W.
McKinlay, A. S.
Silkin, Rt. Hon. L.


Gilzean, A.
McLeavy, F.
Silverman, J. (Erdington)


Glanville, J. E. (Consett)
MacPherson, Malcolm (Stirling)
Silverman, S. S. (Nelson)


Gordon-Walker, P. C.
Macpherson, T. (Romford)
Simmons, C. J.


Grey, C. F.
Mainwaring, W. H.
Skeffington-Lodge, T. C.


Grierson, E.
Mallalieu, J. P. W. (Huddersfield)
Skinnard, F. W.


Griffiths, D. (Rother Valley)
Mann, Mrs. J.
Smith, C. (Colchester)


Griffiths, Rt. Hon. J. (Llanelly)
Manning, C. (Camberwell, N.)
Smith, S. H. (Hull, S. W.)


Griffiths, W. D. (Moss Side)
Marquand, Rt. Hon. H. A.
Sorensen, R. W.


Guest, Dr. L. Haden
Mathers, Rt. Hon George
Soskice, Rt. Hon. Sir Frank


Gunter, R. J.
Mellish, R. J.
Sparks, J. A.


Guy, W. H.
Messer, F.
Stubbs, A. E.


Haire, John E. (Wycombe)
Middleton, Mrs L.
Sylvester, G. O.


Hale, Leslie
Moody, A S.
Symonds, A. L.


Hall, Rt. Hon. Glenvil
Morley, R.
Taylor, R. J. (Morpeth)


Hamilton, Lieut -Col R.
Morris, Lt.-Col. H. (Sheffield, C.)
Thomas, D. E. (Aberdare)


Hannan, W. (Maryhill)
Morris, P. (Swansea, W.)
Thomas, George (Cardiff)


Hardy, E. A.
Morris, Hopkin (Carmarthen)
Thomas, I. O. (Wrekin)


Hastings, Dr. Somerville
Mort, D. L.
Thomas, John R. (Dover)


Haworth, J.
Moyle, A.
Thorneycroft, Harry (Clayton)


Henderson, Joseph (Ardwick)
Murray, J. D.
Thurtle, Ernest


Herbison, Miss M.
Nally, W.
Timmons, J.


Hewitson, Capt M.
Naylor, T. E.
Titterington, M. F.


Hobson, C. R.
Neal, H. (Claycross)
Tolley, L.


Holman, P.
Nichol, Mrs. M. E. (Bradford, N.)
Tomlinson, Rt. Hon. G.


Holmes, H. E. (Hemsworth)
Nicholls, H. R. (Stratford)
Turner-Samuels, M.


Horabin, T. L.
Noel-Baker, Rt. Hon. P. J. (Derby)
Ungoed-Thomas, L.


Houghton, A. L. N. D.
Noel-Buxton, Lady
Vernon, Maj. W. F.


Hoy, J.
Oldfield, W. H.
Wadsworth, G.


Hubbard, T.
Oliver, G. H.
Walker, G. H.


Hudson, J. H. (Ealing, W.)
Orbach, M.
Warbey, W. N.


Hughes, Emrys (S. Ayr)
Paget, R. T.
Watkins, T. E.


Hughes, Hector (Aberdeen, N.)
Paling, Will T. (Dewsbury)
Webb, M. (Bradford, C.)


Hughes, H. D. (W'lverh'ton, W.)
Palmer, A. M. F.
Wells, P. L. (Faversham)


Hynd, J. B. (Attercliffe)
Pargiter, G. A.
West, D. G.


Irving, W. J. (Tottenham, N.)
Parker, J.
Wheatley, Rt. Hn. J. T. (Edinb'gh, E.)


Isaacs, Rt. Hon G. A.
Parkin B. T.
White, H. (Derbyshire, N. E.)


Jay, D. P. T.
Paton, Mrs. F. (Rushcliffe)
Whiteley, Rt. Hon. W.


Jeger, G. (Winchester)
Paton, J. (Norwich)
Wilcock, Group-Capt. C. A. B.


Jeger, Dr. S. W. (St. Pancras, S. E.)
Pearson, A.
Wilkes, L.


Jenkins, R. H.
Peart, T. F.
Wilkins, W. A.


John, W.
Poole, Cecll (Lichfield)
Willey, F. T. (Sunderland)


Jones, Rt Hon. A C. (Shipley)
Popplewell, E.
Williams, D. J. (Neath)


Jones, D. T. (Hartlepool)
Porter, E. (Warrington)
Williams, J. L. (Kelvingrove)


Jones, Elwyn (Plaistow)
Porter, G. (Leeds)
Williams, Ronald (Wigan)


Jones, J. H. (Bolton)
Proctor, W. T.
Williams, Rt. Hon. T. (Don Valley)


Keenan, W.
Pryde, D. J.
Williams, W. R. (Heston)


Kendall, W. D.
Pursey, Comdr. H.
Wills, E.


Key, Rt. Hon. C. W.
Randall, H. E.
Wills, Mrs E. A.


Kinley, J.
Ranger, J.
Woodburn, Rt. Hon. A.


Kirby, B. V.
Rankin, J.
Yates, V. F.


Lang, G.
Rees-Williams, D. R.



Lavers, S.
Reid, T. (Swindon)
TELLERS FOR THE NOES:




Mr. Snow and Mr. George Wallace.

New Clause.—(AMENDMENT OF FINANCE ACT, 1948, S. 42.)

Section forty-two of the Finance Act, 1948, shall have effect as if the words "Commissioners of Inland Revenue," were substituted for the word "surveyor," wherever it appears.—[Lieut.-Commander Braithwaite.]

Brought up, and read the First time.

Lieut.-Commander Braithwaite: I beg to move, "That the Clause be read a Second time."
The Committee has just been discussing a matter of great human and social interest beside which I fear the new Clause entrusted to me makes a somewhat tedious substitute. I hope it will


commend itself to hon. Gentlemen opposite because it costs nothing. It is a purely machinery Clause of a technical and I fear a tedious nature. As the Financial Secretary to the Treasury, who helped to pilot it through, will recall, Part IV of the Finance Act of last year dealt, in extenso, with the whole question of expenses and allowances, but did not attempt to alter the substantive law which is to be found in Rules 1 and 9 of Schedule E, and the cases decided with reference to those rules.
The right hon. Gentleman will agree that since 1939 the Revenue authorities have been in the position of being able to get the necessary information to enable them to deal with abuses in connection with taxation allowances. Before the war the subject was increasingly attracting the attention of Chancellors of the Exchequer. Preoccupation with the many problems of the war no doubt meant that the necessary time and attention could not be provided to deal with this matter, since the law on the subject had been clear for a number of years, and Rule 9 was distinctly narrow in scope. As the right hon. Gentleman knows and as has been stated in the House more than once, the inspectors of taxes have received instructions to tighten up their scrutiny of expenses and, in particular, to enforce the provisions of Part IV of last year's Finance Act. There is already evidence that the application of the law as it has existed for many years is causing hardship and impeding the proper conduct of business.
This arises, for example, in the disallowance of expenses incurred by directors in attending board meetings, particularly directors resident in the provinces who have to come up to London for that purpose, and the inverse argument is also true in respect of experienced men in London who may sit on boards of companies situated in provincial areas. For some 60 years it has been the law that these expenses are not chargeable under Rule 9. In the past the practice has been not to tax sums paid to directors in respect of such travelling expenses. I hope the Financial Secretary will agree when I suggest that the new practice has, in some cases, led to directors feeling obliged to resign from some boards and that that has the effect of making such

boards less representative in their character.

The Deputy-Chairman: Do I take it that the hon. and gallant Gentleman is addressing himself to the Clause in the name of the right hon. Gentleman the Member for the City of London (Mr. Assheton) where the proposal is that the words "Commissioners of Inland Revenue" shall be substituted for the word "surveyor"?

Lieut.-Commander Braithwaite: That is the Clause with which I am dealing, Mr. Bowles. I hope that my remarks will be addressed to that point, for that will be my intention. As this deals with the whole question of expenses, I hope that you will allow me to review the matter not briefly, but over a somewhat wide field.
I was remarking that it would make the constitution and character of these boards rather less representative than is really desirable. There are many cases where a director is appointed because of his knowledge of business conditions in some part of the country a long way from where the head office is situated. Last year when this matter was discussed at some length during the Committee stage of the Finance Bill, right hon. Gentlemen opposite made considerable play with the dispensation provisions now contained in Section 42, but it should be noted that the person who has to be satisfied on this matter of the expenses allowance is the surveyor—in other words, the local inspector of taxes—and that there is no machinery for appealing against his decision when it is given.
9.15 p.m.
If the taxpayer so appeals against his assessment to the General or Special Commissioners, their duty is to apply the law, which is strict, and cases show that, where the General Commissioners have been sympathetic to a taxpayer's claim under Rule 9, their decision has on occasion been reversed on appeal to the High Court by way of a case being stated. The suggestion behind this new Clause is to try to get the law altered, in particular, by seeking the amendment of Rule 9. Again, the Financial Secretary will recall that unsuccessful attempts were made during the passage of the two Finance Bills previous to this one.
There is one other point which I will submit to the Financial Secretary, and that is the amendment of the machinery provisions of Part IV of last year's Act. I ask the right hon. Gentleman whether it is possible that Section 42 might be amended so as to have the effect of the Commissioners of Inland Revenue being satisfied rather than the surveyor. May I repeat the point? There is appeal machinery there which does not exist in the case of the surveyor. That was the course adopted in relation to the approval of retirement benefit schemes which were covered in that long subsection of Clause 47. Again, the Financial Secretary may remember four Clauses being bodily removed and four entirely new ones inserted after consultation took place between the then Chancellor and certain representatives of industry. Under Section 21, which was inserted then, it is the Commissioners of Inland Revenue and not the surveyor who have to give such proof. All that valuable amendment which took place at that time had the beneficial result of setting up a department at Somerset House which has since administered these matters on practical lines and built up a body of consistent practice in the matter.
In putting forward this new Clause for consideration, we suggest that here is a parallel which might be followed and that the right hon. Gentleman might consider the setting up of machinery of that sort to deal with one grievance in particular, namely, the discrepancy in outlook which we find in practice between one tax district and another. That would render possible the decision of questions arising on a sufficiently high level without placing the taxpayer under his present necessity of appealing to the Commissioners, General or Special, with the doubtful prospect of success which I have endeavoured to indicate.
I thank hon. Members for listening with patience to what is a somewhat complicated argument—

Mr. James Hudson: Jolly well read.

Lieut.-Commander Braithwaite: I hope hon. Members will not be sarcastic on those grounds because, when the Financial Secretary himself has to deal with difficult technical matters, he is provided with what is known in this honourable House as "copious notes" with which to make

his comments, and it is rather better that the matter should be put correctly, even if it does mean a good deal of reference to information supplied to the hon. Member moving the Clause. Hon. Members would be rather worthier of the House if, instead of engaging in sarcasm, they addressed themselves to the argument. It is in the interests of uniformity that I move this new Clause.

Mr. Selwyn Lloyd: I want to add very little to what my hon. and gallant Friend the Member for Holderness (Lieut.-Commander Braithwaite) has said. The Financial Secretary to the Treasury will remember that during the Third Reading Debates on the Finance Bill last year I raised this question of directors' expenses and forecast, I think, precisely the difficulty which the Clause is designed to resolve. The right hon. Gentleman said then that the administration of these new provisions in Part IV of the Finance Act, 1948, would be carefully watched by the Treasury in the course of the following 12 months to see whether or not any adjustments were necessary.
The general point, as my hon. and gallant Friend has said, is that for 60 years directors of companies have been allowed to deduct travelling expenses in going to board meetings or to treat them as moneys expended wholly, exclusively and necessarily in performing the duties of their office of employment. That has been the practice, I am instructed, for 60 years. They have been allowed to count those travelling expenses as expenses which can be deductible. That proposition had some doubt cast upon it in the course of the discussions of Part IV of the Finance Act, 1948.
I understand the effect has been that in some areas the interpretation has been one way and in other areas in another way. It seems to us, first, that the Treasury should make it quite clear that this practice of 60 years should be maintained; and secondly, that the general methods of computing and allowing these expenses, and giving the certificate referred to in Section 42 of the 1948 Act, should be dealt with by one centralised Department. That is the common sense way of dealing with the matter. I shall not elaborate on the point, but I hope that the right hon. Gentleman will give some indication of the way in which


Part IV has been administered during the past year and say whether or not he can accept this proposition.

Mr. Jay: As the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) said, the new Clause relates to a very narrow point. It is concerned simply with the power which the taxation authorities possess in carrying out the provisions of Section 42 of the Finance Act, 1948, to grant dispensations in respect of certain expenses incurred by directors or highly paid employees. The only real issue between us is whether that power of dispensation should be in the hands of the Commissioners of Inland Revenue or in the hands of the surveyor—that is to say, the local tax inspector. The hon. and learned Member for Wirral (Mr. Selwyn Lloyd) asked whether we had considered the working of this provision and were satisfied with it. The answer is that we have watched it and that we are, broadly, satisfied. We do not agree that it is necessary or desirable to substitute the Commissioners in this case for the surveyors. This is, of course, largely a matter of administration and, naturally, the opinion of the Department responsible for it about the best method to employ must carry some weight.
If the hon. Gentlemen were to ask the reasons why we think it is preferable to leave the power in the hands of the surveyor I would mention, briefly, three. First, there really is no difference in kind between this function which we are discussing and the normal job of allowing or disallowing admissible expenses for Income Tax. Therefore, the local inspector is, naturally, qualified to do the job. Secondly, of course, he is, by virtue of his local knowledge and experience, conversant with the taxation affairs of the company in question and, as a normal principle of administration, he should be better able to judge than somebody who is less decentralised and not as close at hand.
Thirdly, as both hon. Members will realise, the Commissioners issue general instructions on general points to local inspectors all over the country for their guidance in exercising this power of dispensation. That, of course, should ensure that similar principles on general

points are followed in different areas. Both hon. Members suggested that in the case of travelling expenses in particular that apparently did not happen, according to their information. We are certainly fully prepared to look at that matter, and any evidence of it; and if it is shown that there are different practices being followed we should certainly take steps to see that general instructions were sent out which would correct any anomalies. That would apply equally to anomalies on other points. If that were done it would not be necessary to go so far as this new Clause suggests.

Mr. Stanley: I apologise for intervening, and I admit at once that I am not an expert and do not retain in my memory all the Clauses which the experts know so well. The hon. Gentleman in his reply has put the matter on a very simple basis. We admit that the Clause which we are discussing is of a very narrow and restricted character, although apparently it is a symptom of what appears to be a much bigger grievance, and one which could only be affected by some alteration in the rules.
I do not know what my hon. Friends who are responsible for this new Clause think, but the hon. Gentleman did go some way to meet them in promising that he would look into any evidence which could be provided of different treatment in different areas. That is a matter which all of us, experts or amateurs like myself, must be anxious to avoid. We must always want to ensure that people are treated in the same way in all parts of the country in matters of this kind. We have put forward this new Clause because we believe that differences are arising and that if that is so, this may be the best way of solving them.
There is nothing revolutionary in the proposal which my hon. Friends have made. It was the proposal of the Government themselves for dealing with that part of the 1947 Act which dealt with the whole question of retirement pensions. If the hon. Gentleman is prepared to look into this matter with a genuine desire—as I am sure he will—to see if a grievance exists, and if a grievance is found to exist to remedy it in whichever way is found best from the point of view of administration, I hope that my hon. Friends will be satisfied at having raised


this point and at having received some satisfaction at any rate from the Minister.

Mr. Gallacher: Will the right hon. Gentleman explain to me why he is anxious to emphasise that there is nothing revolutionary about this proposal? Is he afraid that if there was anything revolutionary, it might frighten the Government Front Bench?

Mr. Stanley: That is precisely the point. We on this side, who belong to a progressive party, always know that our best hope of obtaining any satisfaction from the Front Bench opposite is to be able to cite a precedent. It is for that reason that I have emphasised that a precedent exists for the action here proposed.

9.30 p.m.

Mr. Frederic Harris: There are one or two points of elucidation which I should like to raise. As I understand it, the position today is such that many companies are denied the benefit of very capable directors because of this financial hardship if they accept a position in the capacity of director, whereas, if they became executives, they would be permitted to make this charge. If we take the obvious comparison with Members of Parliament, I think it is right to say that they are permitted the expenses of coming to Parliament as an actual allowance, and yet we have the position in which we are denying private enterprise the considerable benefits of very capable people because of this unfair situation. I understood the Economic Secretary to say that instructions had been sent to inspectors generally on this point. Would he be good enough to tell the Committee what the details of those instructions are? Should we not enjoy the same privilege as he has in that respect?

Lieut.-Commander Braithwaite: Hon. Members will recall that one of the principal objects in moving this new Clause was to provide the machinery of appeal, and I was disappointed that the Economic Secretary did not see the force of that line of thought. However, as the hon. Gentleman has said that this matter will be constantly watched, and as it has only operated since the Finance Act of last year, and he has given an assurance that if the procedure works unsatisfactorily

and produces unfairness, he will not be too proud to come down here to put down his own Amendment, I beg to ask leave to withdraw the Motion.

Motion, and Clause, by leave withdrawn.

The Deputy-Chairman: Mr. Selwyn Lloyd.

Lieut.-Commander Braithwaite: On a point of Order. May I ask whether any of the new Clauses dealing with postwar credits are being called, because the subject is one of great importance and interest in the country?

The Deputy-Chairman: None is being called, because they are all out of Order since they increase the charge on the Consolidated Fund.

New Clause.—(AMENDMENT OF FINANCE ACT, 1947, s. 33.)

Section thirty-three of the Finance Act, 1947, shall have effect as if there were substituted for the words "two thousand pounds," the words "three thousand pounds," and for the words "twelve thousand pounds," the words "eighteen thousand pounds," wherever they appear.—[Mr. Selwyn Lloyd.]

Brought up, and read the First time.

Mr. Selwyn Lloyd: I beg to move, "That the Clause be read a Second time."
This new Clause proposes an Amendment to the Finance Act, 1947, and the relevant provision of that Act which I want to raise is Section 33. It deals with the abatement in respect of Profits Tax, which is given to small businesses. The effect of that Section is that any business or any limited company which earns £12,000 or less receives an abatement in respect of Profits Tax, and the way in which that abatement is calculated is for the amount of the profits actually made to be deducted from £12,000 and the resulting sum to be divided by five. If, for example, a company made a profit of £2,000, that sum deducted from £12,000 would leave £10,000, which, divided by five, produces £2,000, which is the amount of the abatement.
I notice that the Solicitor-General seems to be doubtful about my method of working it out, but I am advised that it is calculated that way. To take another example, that of a company which earns £8,000, in that case that figure is deducted


from £12,000, bringing it to £4,000, one-fifth of which is £800, which is the amount of the abatement, and the company therefore pays Profits Tax on £7,200. I am greatly reinforced to find that both right hon. Gentlemen, the Financial Secretary and the Solicitor-General, are now nodding vigorously to that proposition. This new Clause increases the limit up to £18,000, so that a company which earns £3,000 will pay no Profits Tax, and, beween £3,000 and £18,000, there will be an abatement calculated in the way I have described. This new Clause is meant to be a direct encouragement to the smaller type of limited company.
At the present time we receive a great many exhortations to enterprise. Individuals are invited to become merchant adventurers, to go forth and sell British goods in all parts of the world, to develop new processes, to make new inventions, and to display that great spirit of enterprise which our forefathers certainly had. Those are the exhortations. Let us give these people, whom we expect to undertake such tasks, some encouragement. It is extremely unlikely these days that they will embark on such projects unless protected by the Companies Act, unless they are in the form of limited liability companies.
This new Clause deals only with limited liability companies and it will provide a direct incentive to the smaller type of company, because I suggest that hon. Gentlemen opposite and the Government are completely blind to the facts of life in this respect. [HON. MEMBERS: "In every respect."] I am not dealing with every respect, although it may be in every respect. In this respect they continue to expect people to risk their money on the basis that if they make profits the Government will take 50 per cent. of the profits and if they make losses the Government will not contribute one penny towards those losses. That is a statement of fact; in fact, the Economic Secretary to the Treasury had the effrontery the other day to say that that made the Government a partner in industry.
Of course, it is perfectly true that the whole of the social services and the other structures of Government in this country depend on the sums of money which are extracted by the Government from private enterprise, and I hope that

hon. Members will believe me when I say—and I say it as one whose constituency is closely concerned with a great trading and commercial area—that the smaller type of enterprise is just not being begun at the present time. People are not prepared to risk their money, if they have any, on those terms. It is really essential, if these exhortations are to have any practical effect, for the Government to do something concrete about them.
This proposal, for which I ask support in all parts of the Committee, is a pretty modest one, as I think even the Government will admit. It gives no relief at all to a company earning over £18,000; it simply increases the range of this abatement. I submit to the Committee that it is a small but definite step whereby the Government can change this Finance Bill, which is a disincentive Bill, in one small respect at least, into an incentive Bill. It is a Clause which will help British industry in its present tasks.

Sir Patrick Hannon: I rise to support the new Clause moved by my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). We are constantly talking in this country about helping the smaller manufacturer and the smaller trader and from time to time His Majesty's Government have indicated their support of that proposal. Here is an opportunity to give evidence of the desire to help the smaller manufacturer by making a modest concession through this new Clause.
At the present time, the small manufacturer in this country is making a most substantial contribution to our export trade, particularly to the United States. If the Chancellor of the Exchequer were here, I should ask him to witness the extent to which the small manufacturer is responding to the appeal which is constantly made to intensify our efforts to improve our competitive power in markets abroad. The small manufacturers are suffering from a heavy burden in very many of the costs of production. The load of taxation on their shoulders is beyond expression, and it bears heavily upon them in dealing with their everyday life in productive enterprise in this country. Unless the Committee are prepared to give some consideration to the


difficulties which beset smaller manufacturers from day to day, they will feel themselves helpless in dealing with the constant exhortations and appeals made to them by the Administration for enterprise, for extending production, and so on.
I know that the Financial Secretary has made speeches all over the country saying what a magnificent thing it would be if the smaller productive enterprises competed more effectively abroad. Now he has an opportunity to say to smaller manufacturers, "We are going to do something to help you over the difficulties you experience in every-day life in industry." It is no good right hon. Gentlemen on the Front Bench opposite making pleasant speeches about sympathy to industry in this country in fighting our battles in foreign markets. Let the Government do something practical and helpful. An opportunity is submitted to them by my hon. and learned Friend. I ask the Government to show evidence of their real sympathy with the smaller manufacturers of this country by helping them to get out of the difficulties in which they find themselves.

Sir W. Wakefield: I do not think it is realised how great a part in the industrial life of this country is played by the small businesses employing anything from 10 to 200 or 300 people. It is vital for the country at the present time, as Government spokesmen have said, to increase our productivity and to develop our export trade. Here is one way—it is only a small way, but it is one way—to help the small businesses to develop. Much of the present prosperity of this country was developed and built up by small businesses which became large businesses at the end of the last century and the beginning of this. With the burden of taxation we now have, it will be quite impossible in future for any small businesses to develop. Here is one effective way in which some relief of the burden and some inducement to enterprise can be given to the small manufacturer—inducement to put his back into his business and to go ahead. I do hope that the Financial Secretary, for the reasons which I have given and which other hon. Members on this side have given, will sympathetically consider accepting this proposal.

The Solicitor-General: I am sorry to say the Government cannot see their way to make the further concession which is asked for by this new Clause. The Profits Tax was designed in part to reimburse the Exchequer for the fact that the Excess Profits Tax came to an end in 1946. The exemption in respect of companies earning less than £2,000, and the further provision for abatement were, in fact, intended, as hon. Gentlemen opposite have reminded the Committee, to assist small businesses. That was their object. I am afraid that in present day circumstances it would be impossible, having regard to the general calls on the Exchequer, to extend that exemption further than it exists at the moment. The cost of the concession would be £6,500,000, or, having regard to the fact that Profits Tax counts as a deduction for the purposes of Income Tax, the net sum of £3,500,000. I therefore regret to say that, having regard to the cost that would be entailed, the Government do not see their way to extend further the provision which they have made in the existing framework of the Profits Tax legislation to assist small companies.

Sir P. Hannon: Has the Treasury advised the right hon. and learned Gentleman, or has any calculation been made, of the extent that the export trade, as a result of this concession, would gain as against the £3,500,000 lost by the Treasury? Saving money for the Exchequer in many respects means crippling business and our competitive power abroad.

The Solicitor-General: It is extremely difficult to make a calculation of the gains that would come to the Exchequer from increased export trade owing to this concession. There would be no certain basis upon which any such calculation could be made.

9.45 p.m.

Sir W. Darling: I think the Solicitor-General has done himself less than justice. This measure is one which he might consider because it may well be that it is an insurance against the problems and difficulties which we are facing. He may be aware that during the great American slump small businesses with little capital collapsed like ninepins, and large businesses employing tens of


thousands of people were so overcapitalised that they collapsed by the score. The businesses which strengthened the economy of the United States during that great slump were the large number of small family or privately-owned businesses.
This proposal is offered to the Treasury as a buttress against the impending slump which may well come upon us. This reinforcement of £3,500,000 seems petty when we consider the additional estimate for health services of £50 million. I cannot think that £3,500,000 could be better spent. These individually-owned businesses are not run by bloated capitalists; they are not people who are going to enrich themselves at the expense of the community. These people are at the grindstone and are grappling with the day-to-day and the hour-to-hour problems of business. There is a case for this new Clause if only because of the fear that is in the minds of all of us, and not least in the minds of those who occupy the Treasury Bench. Are we going to offer a lift to these people, to encourage them in the ordeal through which they are going to carry the country?
Do His Majesty's Government recognise that this is a nation of shopkeepers, small industrialists and small business men, and that while the great schemes to which we have set our minds may well be realised, it is this solid group—some 60 per cent. of our manufacturing and industrial population—who are carrying the burden of this country's taxation? I ask the Treasury to accept this Clause. They will not regret it, and it will give encouragement to a class who have had, goodness knows, little encouragement from His Majesty's Government.

Mr. Frederic Harris: I think that the statement made by the Solicitor-General is a most shortsighted statement of policy. The position is vastly different from what it was a year or two ago from the point of view of small traders. My hon. Friend the Member for South Edinburgh (Sir W. Darling) said that 60 per cent. of our manufacturing population are carrying the burden of the taxation in this country. I think not 60 per cent. but the better part of 70 per cent. of these small traders are experiencing great difficulties today. The situation with regard to outstanding accounts in respect of debtors,

and the stocks that they are having to carry and which are moving so very slowly, is getting them into a difficult financial situation.
If the Government want any proof of this fact, they have only to refer to many of the banks to see how the accounts turn over from the blue to the red. If the Government really want private enterprise to go ahead, how can a paltry £3,500,000 affect such a major decision as this? A year or two ago their decision may have been right, but the position has now materially changed. The small traders are the backbone of our country and have built it up to what it is today. They are the people who must have assistance under the present circumstances.
Taking the long-sighted point of view, the Government might well get back much more than they give. As far as the machinery is concerned, and as far as their internal resources are concerned, the small private traders need further assistance to strengthen their position. They are breaking down in many respects against the competition they are having to meet, but they are trying to play their part in the export market by linking themselves together to make themselves sounder to meet that competition. But behind them the machinery is not supporting their efforts. We are making it impossible for them to play their full part. The concession I am most anxious to see is a relaxation of the Profits Tax. Surely the Government can take a bold step to help the small traders. I hope that my hon. Friends will press this to a Division, if the Government will not give way.

Mr. Boyd-Carpenter: The reply which has been given by the Solicitor-General is a very disturbing reply from the point of view of its revelation of the mentality of the Government. He dealt with the new Clause purely from the budgetary point of view. He said that this would cost £3½ million which we cannot afford, and that therefore it must be rejected. He never addressed any arguments to the far more important consideration, the stimulus which would be given to the small companies concerned. That quite rightly, was the essence of the case that has been put forward; that in the situation which confronts the country today it is essential to provide some additional encouragement and incentive to those who are running these small businesses.


The Solicitor-General did not reply to that at all, nor did he say a single word on that part of the case.
It is surely significant and disquieting that the Government, in supplying the right hon. and learned Gentleman with his brief, did not think that that was an aspect of the matter at all. It indicates that the Government have no appreciation of the situation into which we are proceeding very rapidly at this moment. They are dealing with it only in the old fashioned budgetary way. When they are faced with a situation of ever-increasing difficulties in regard to British exports, and ever-increasing difficulties for British industry and enterprise, one would have thought that the Government would decide to help British industry and enterprise, and that therefore they would think that to be a consideration worth mentioning. What is terribly disquieting is that these things are considered by the Government to be unimportant and irrelevant, and if that is the mentality with which they are conducting our affairs against the gathering background of a world economic crisis, then heaven help this country.

Viscount Hinchingbrooke: I hope that by now it is apparent to Members opposite how restrictive this Budget of the Chancellor of the Exchequer has been. For four days now we have pleaded for concessions to be made to different classes of the community, and many of these classes are classes with which Members opposite have the greatest sympathy. They now see that the Chancellor of the Exchequer who has deserted the Debate—[HON. MEMBERS: "Oh."]—has left to go to Paris where he may or may not do this country any good—[HON. MEMBERS: "Shame."]—has left this Debate and gone to Paris—[HON. MEMBERS: "Withdraw."]—leaving the Treasury with the instructions—

Hon. Members: Withdraw.

The Deputy-Chairman: Since the noble Lord does not seem likely to withdraw—[HON. MEMBERS: "He has nothing to withdraw."] I am not suggesting that he has anything to withdraw—the Debate will now continue in quietness.

Viscount Hinchingbrooke: The Chancellor has left those who represent him

on the Treasury Bench with explicit instructions that no concession costing any money at all is to be made in these Debates. That is a situation which, in my short Parliamentary experience, is without parallel. Last year the Chancellor and his predecessor allowed latitude to Members of the House to develop the merits of their cases and to secure concessions of a relatively simple order. But on this occasion we have not been allowed to get away with any concession costing any money. The only things which have been conceded are two minor points affecting cinemas and dogs, which did not cost the Treasury a penny. The diktat is that nothing is to be done to restore the fortunes of small businesses, or families, or local groups, or whatever it may be. Not one item of Government expenditure is to be remitted. I wonder why my right hon. and hon. Friends have bothered to continue the Debate, because it is obvious that right hon. and hon. Members opposite have come here without any intention of entering into the merits of any of our discussions.
This is the most deplorable exhibition I have ever seen. It shows the mentality of the Treasury and the Chancellor under the new dispensation and the contumely with which the right hon. and learned Gentleman treats the House of Commons. I know that many Members opposite would like to see concessions made to their own constituents; indeed, they pleaded for them not only in the Debate on the Budget but also in a private committee upstairs, as was revealed to us in the newspapers. How they are able to sit still and accept a blank refusal to grant them any kind of concession, I simply do not know.
Here we have a typical case of small businesses which, as has been pointed out, are serving the country magnificently today. Perhaps a small company, two years ago, made £2,000 profit and paid no Excess Profits Tax. Within the last two years it expanded until now it is penalised by entering into the range in which it has to pay Profits Tax. Instead of being rewarded for the extra profit it has made in carrying out the wishes of the country in increasing productivity and exports, it is denied any remission of tax. The spectacle now before us is deplorable; the Committee is being treated as a rubber stamp by the Treasury and the


iron Chancellor, and the sooner we get rid of him and his ideas the better it will be for the country.

Mr. Spearman: I often find myself in agreement with my hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), but I did so more particularly tonight when he expressed his anxiety at the state of mind of the Government as exposed by the Solicitor-General. The right hon. and learned Gentleman told us, as he has told us on previous occasions, that this concession must be refused because it would cost £3½ million, but he made no difference whatever between the cost of £3½ million going out to undistributed profits and the cost of a concession amounting to £3½ million if it were to reduce Purchase Tax or some other tax which would increase the spending power of the country.
10.0 p.m.
I think the Solicitor-General must have been forgetting his present master, and must have thought that he was still in the days of the Chancellor of the Duchy, who was renowned for being entirely old-fashioned and out of date in his economic views. I would not say the same of the present Chancellor to the same extent. Surely under the modern conception of finance it is clearly understood that in a time of full employment, such as we are experiencing now, the whole point of the Budget is to sterilise that amount of purchasing power in order to get a balance between the total resources of the country and the total demand. There is no point in having an enormous Budget for the sake of it, in order to get that balance.
A concession on undistributed profits makes no difference to the amount of purchasing power, so that that is a concession of an altogether different order of merit from a concession on Purchase Tax or any other concession which would increase the purchasing power of the country. On any concession of that sort I should very much hesitate to vote against the Government; but a concession of this sort is an entirely different matter. I ask the Solicitor-General whether he really appreciates the fundamental difference between those two, because I can assure him that there is a considerable number of thinking people in the country who are not particularly opposed

to the Socialist Party but who are extremely disturbed at the complete inability of the Socialist Party Front Bench at the present time to understand the modern conception of finance, and who realise that in many ways they are completely out of date. Indeed, I can very well understand why, if the Government anticipate such old-fashioned, out-of-date, obtuse statements such as we have had from the Solicitor-General tonight, they prefer all-night Sittings in the hope that those statements will not be widely reported in the Press.

Mr. R. A. Butler: I would make an appeal to the leaders on the Treasury Bench to give an answer to the arguments put forward from this side of the Committee. The Solicitor-General has obviously come to the Committee with a brief marked "This is a most unimportant Clause," because he has not given us any arguments or reasons in response to those put forward by my hon. Friends. It must be quite clear to all sides of the Committee that we on this side attach great importance to this new Clause. It may seem very small upon the Order Paper, but it is very important. We cannot make a success of the British economy and of our drive for production unless some incentive and encouragement is given to the small businesses of this country.
During the Debate I heard a remark passed from the Government Benches "What about the workers?" [HON. MEMBERS: "Hear, hear."] I now hear it repeated. Let hon. Members opposite address themselves to this argument. We on this side at least have tried to attach importance to the value of the British workers and of the work they can do for us at the present time; it is quite clear that they form a most vital element of our population. Let us take that for granted. I assure hon. Members that we are quite sincere on that point. Yet these small businesses have particularly close and personal relations with their workers, and I feel quite convinced that we shall have the support of the majority of workers attached to businesses like these when they realise the negative stand the Government have taken on this matter tonight. One advantage of the small business, especially a family business, is that there is this close personal relationship between what is known as "the boss"


and the workers; they know that they are all in the same boat together, and they must know the difficulties their businesses are suffering from at the present time.
I feel convinced that there is a fundamental difference of principle between the Opposition and the Government tonight. We believe that it would restore the productivity of this country and assure the standard of life of the workers if business and industry were given incentives. But if the Government take up a wholly negative attitude we cannot be sure where that will lead. It is because we have been disappointed at the Government's attitude that we are determined to take this matter to a Division. I implore the Government to give us some reasons against the considered arguments we have put forward.

Mr. Fairhurst: I am disturbed about the impending disaster which we are told is awaiting the small traders. The Opposition have suggested that 60, or may be 70 per cent. of the businesses carried on in this country are small businesses, and that taking this £3½ million will almost ruin them. [HON. MEMBERS: "No."] Well, at least they say that there is no incentive. The profits earned last year were somewhere in the region of £2,000 million.

Sir W. Darling: Not by this type of business.

Mr. Fairhurst: It includes all that kind of business. What effect would £3½ million have on those profits?

Mr. Butler: Let me quote the words which the Chancellor of the Exchequer, whose absence we all regret tonight and the reasons for which we understand, used at Workington on the subject of profits on 9th January, when he said:
A large part of the so-called profit is not a bare surplus, but must be put to reserve to pay for replacements and repairs of plant and machinery and for industrial expansion to meet our new production needs.
It is in the exact sense of those words of the Chancellor of the Exchequer that we are moving this Amendment tonight, and I am using the Chancellor's words to answer the hon. Gentleman and the Government.

Mr. Hopkin Morris: As I understood it, the argument of the

Solicitor-General for maintaining this £3½ million is because of the abolition of part of the Excess Profits Tax in 1946. He said it was necessary to have some compensation for the loss of revenues from Excess Profits Tax. I find it very hard to understand that argument, because the existence of this £3½ million and the loss of of revenue by the abolition of the Excess Profits Tax cannot be related in importance or in any other way. How can it be compensation for the loss of Excess Profits Tax? The sum of £3½ million is in no sense compensation, but it would be of great advantage to the small businessmen of this country. As I see it, the one argument put forward by the Solicitor-General appears to be quite irrelevant in this connection.

Mr. Oliver Poole: I am sorry the right hon. Gentleman opposite has not thought fit to reply to the moderate suggestions put forward by my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler). I should like to recall to the Committee that at the end of April, the President of the Board of Trade saw fit to summon rather peremptorily, a gathering of businessmen representing groups of small businesses in this country and to exhort them to further efforts in order to overcome the difficulties which he and the Government quite rightly saw were facing this country. I should like to ask the right hon. Gentleman what concrete help are the Government giving to those persons to help them to become merchant adventurers, a phrase used on that occasion, and to fulfil the task that was set them by the right hon. Gentleman.
At that meeting the attitude was that it was all very well to offer words of that kind to industry, but actions were necessary. The attitude of the Government Front Bench tonight, in refusing to reply to my right hon. Friend, is deplorable, and I am bound to say that the attitude of hon. Gentlemen opposite shows exactly how much the Socialist Party are prepared to support the sort of plea put forward in April by the President of the Board of Trade. It seems to me an extraordinary thing that the Members of the Government can call a conference of the kind I have mentioned, and then two or three months later, when pleas are made to them, similar to the pleas which they made on that occasion


to those small businesses, they should flatly refuse to give even moderate support to those industries to carry out the tasks which they have to undertake.

Mr. Glenvil Hall: Neither my right hon. and learned Friend nor I, speaking for the Government, desires to appear in the slightest bit discourteous to the arguments which have been advanced by hon. Gentlemen opposite. What my right hon. and learned Friend said, in brief, was that we had in existence an Excess Profits Tax. In 1946, for reasons which appeared good, it was brought to an end, and the question arose whether anything should take its place. In the circumstances of the time, in view of the appeals made to the workers generally, it was felt—at that time the House generally agreed—that some other tax on profits should take its place, and the Profits Tax as such came into existence. Even then my right hon. and learned Friend took into account that there were small businesses of the kind which have been spoken about with such lucidity this evening by hon. Gentlemen opposite, and I think that the concession then made was not a bad one.
What the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) now wants to do is to increase the £2,000 to £3,000 at the lower end and the £12,000 to £18,000 at the higher. As

my right hon. and learned Friend said, apart altogether from the arguments for and against, it would cost him too much. However, something is being done for small businesses. As somebody remarked, if a firm previously making less than £2,000 profits went to £3,000, they ought not be penalised for so doing. However, that would apply to all of us. We are all bearing our fair share of the very heavy taxation, and it would be unfair at this juncture to pick out one class, however deserving that class might be, and say, "We are going to put you into a special category by yourself." It would not look well.

The case has not been made out. In any case, whether a case is made out or not, the cost to the Chancellor of the Exchequer at this juncture would be more than my right hon. and learned Friend can contemplate. It is £6,500,000 gross and £3,500,000 net. I am sorry, but my right hon. and learned Friend cannot agree to forgo that amount.

Several Hon. Members: Several Hon. Members rose—

Mr. Whiteley: Mr. Whiteley rose in his place and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 285; Noes, 137.

Division No. 188.]
AYES
[10.15 p.m.


Acland, Sir R.
Broughton, Dr. A. D. D.
Davies, R. J. (Westhoughton)


Adams, Richard (Balham)
Brown, George (Belper)
Davies, S. O. (Merthyr)


Albu, A. H.
Brown, T. J. (Ince)
Deer, G.


Allen, A. C. (Bosworth)
Bruce, Maj. D. W. T.
Delargy, H. J.


Alpass, J. H.
Burden, T. W.
Diamond, J.


Attewell, H. C.
Burke, W. A.
Dobbie, W.


Austin, H. Lewis
Butler, H. W. (Hackney, S.)
Dodds, N. N.


Awbery, S. S.
Callaghan, James
Driberg, T. E. N.


Ayles, W. H.
Carmichael, James
Dugdale, J. (W. Bromwich)


Ayrton Gould, Mrs. B.
Champion, A. J.
Dye, S.


Bacon, Miss A.
Chetwynd, G. R.
Ede, Rt. Hon. J. C.


Baird, J.
Cobb, F. A.
Edwards, W. J. (Whitechapel)


Balfour, A.
Cocks, F. S.
Evans, Albert (Islington, W.)


Barnes, Rt. Hon. A. J.
Coldrick, W.
Evans, E. (Lowestoft)


Barstow, P. G.
Collick, P.
Evans, John (Ogmore)


Barton, C.
Collindridge, F.
Evans, S. N. (Wednesbury)


Bechervaise, A. E.
Collins, V. J.
Ewart, R.


Benson, G.
Colman, Miss G. M.
Fairhurst, F.


Berry, H.
Cook, T. F.
Farthing, W. J.


Beswick, F.
Cooper, G.
Fernyhough, E.


Bing, G. H. C.
Corbet, Mrs. F. K. (Camb'well, N. W.)
Follick, M.


Binns, J.
Corlett, Dr. J.
Forman, J. C.


Blackburn, A. R.
Cove, W. G.
Fraser, T. (Hamilton)


Blenkinsop, A.
Crawley, A.
Gaitskell, Rt. Hon. H. T. N.


Blyton, W. R.
Cullen, Mrs.
Gallacher, W.


Bowden, Fig. Offr. H. W.
Daggar, G.
Ganley, Mrs. C. S.


Braddock, Mrs. E. M. (L'pl, Exch'ge)
Daines, P.
Gibbins, J.


Braddock, T. (Mitcham)
Davies, Edward (Burslem)
Gibson, C. W.


Bramall, E. A.
Davies, Ernest (Enfield)
Gilzean, A.


Brook, D. (Halifax)
Davies, Harold (Leek)
Glanville, J. E. (Consett)


Brooks, T. J. (Rothwell)
Davies, Haydn (St. Pancras, S. W.)
Gordon-Walker, P. C.




Grey, C. F.
McGhee, H. G.
Stott-Elliot, W.


Grierson, E.
McGovern, J.
Segal, Dr. S.


Griffiths, D. (Rother Valley)
Mack, J. D.
Shackleton, E. A. A.


Griffiths, Rt. Hon. J. (Llanelly)
McKay, J. (Wallsend)
Sharp, Granville


Griffiths, W. D. (Moss Side)
Mackay, R. W. G. (Hull, N. W.)
Shurmer, P.


Guest, Dr. L. Haden
McKinlay, A. S.
Silkin, Rt. Hon. L.


Gunter, R. J.
McLeavy, F.
Silverman, J. (Erdington)


Guy, W. H.
Macpherson, T. (Romford)
Silverman, S. S. (Nelson)


Haire, John E. (Wycombe)
Mainwaring, W. H.
Simmons, C. J.


Hale, Leslie
Mallalieu, J. P. W. (Huddersfield)
Skeffington-Lodge, T. C.


Hall, Rt. Hon. Glenvil
Mann, Mrs. J.
Skinnard, F. W.


Hamilton, Lieut.-Col. R.
Manning, C. (Camberwell, N.)
Smith, C. (Colchester)


Hannan, W. (Maryhill)
Marquand, Rt Hon. H. A.
Smith, S. H. (Hull, S. W.)


Hardy, E. A.
Mathers, Rt Hon George
Sorensen, R. W.


Hastings, Dr. Somerville.
Mellish, R. J.
Soskice, Rt. Hon Sir Frank


Haworth, J.
Messer, F.
Sparks, J. A.


Henderson, Rt. Hn. A. (Kingswinford)
Middleton, Mrs. L.
Stross, Dr. B.


Henderson, Joseph (Ardwick)
Millington, Wing-Comdr E. R.
Stubbs, A. E.


Herbison, Miss M.
Monslow, W.
Sylvester, G. O.


Hewitson, Capt. M.
Morley, R.
Symonds, A. L.


Hobson, C. R.
Morris, Lt.-Col. H. (Sheffield, C.)
Taylor, R. J. (Morpeth)


Holman, P.
Morris, P. (Swansea, W.)
Thomas, D. E. (Aberdare)


Holmes, H. E. (Hemsworth)
Mort, D. L.
Thomas, George (Cardiff)


Horabin, T. L.
Moyle, A.
Thomas, I. O. (Wrekin)


Houghton, A. L. N. D. (Sowerby)
Murray, J. D.
Thomas, John R. (Dover)


Hoy, J.
Nally, W.
Thorneycroft, Harry (Clayton)


Hubbard, T.
Neal, H. (Claycross)
Thurtle, Ernest


Hudson, J. H. (Ealing, W.)
Nichol, Mrs. M. E. (Bradford, N.)
Timmons, J.


Hughes, Emrys (S. Ayr)
Nicholls, H. R. (Stratford)
Titterington, M. F.


Hughes, Hector (Aberdeen, N.)
Noel-Baker, Rt. Hon. P. J. (Derby)
Tolley, L.


Hughes, H. D. (W'lverh'pton, W.)
Oldfield, W. H.
Tomlinson, Rt. Hon. G.


Hynd, J. B. (Attercliffe)
Oliver, G. H.
Turner-Samuels, M.


Irvine, A. J. (Liverpool)
Orbach, M.
Ungoed-Thomas, L.


Irving, W. J. (Tottenham, N)
Paget, R. T.
Usborne, Henry


Isaacs, Rt. Hon. G. A.
Paling, Will T. (Dewsbury)
Vernon, Maj. W. F.


Jay, D. P. T.
Palmer, A. M. F.
Walker, G. H.


Jeger, G. (Winchester)
Pargiter, G. A.
Wallace, G. D. (Chislehurst)


Jeger, Dr. S. W. (St. Pancras, S. E.)
Parker, J.
Wallace, H. W. (Walthamstow, E.)


Jenkins, R. H.
Parkin, B. T.
Warbey, W. N.


John, W.
Paton, Mrs. F. (Rushcliffe)
Watkins, T. E.


Jones, Rt. Hon. A. C. (Shipley)
Paton, J. (Norwich)
Webb, M. (Bradford, C.)


Jones, D. T. (Hartlepool)
Pearson, A.
Weitzman, D.


Jones, Elwyn (Plaistow)
Peart, T. F.
Wells, P. L. (Faversham)


Jones, J. H. (Bolton)
Poole, Cecil (Llehfield)
West, D. G.


Keenan, W.
Porter, E. (Warrington)
Wheatley, Rt. Hon. John (Edin'gh, E.)


Key, Rt. Hon. C. W.
Porter, G. (Leeds)
White, H. (Derbyshire, N. E.)


Kinghorn, Sqn.-Ldr. E.
Proctor, W. T.
Whiteley, Rt. Hon W.


Kinley, J.
Pryde, D. J.
Wigg, George


Kirby, B. V.
Pursey, Comdr. H.
Wilcock, Group-Capt. C. A. B.


Lang, G.
Randall, H. E.
Wilkes, L.


Lavers, S.
Ranger, J.
Wilkins, W. A.


Lee, F. (Hulme)
Rankin, J.
Willey, F. T. (Sunderland)


Lee, Miss J. (Cannock)
Rees-Williams, D. R.
Williams, D. J. (Neath)


Leonard, W.
Reid, T. (Swindon)
Williams, J. L. (Kelvingrove)


Leslie, J. R.
Rhodes, H.
Williams, Ronald (Wigan)


Levy, B. W.
Richards, R.
Williams, W. T. (Hammersmith, S.)


Lewis, J. (Bolton)
Ridealgh, Mrs. M.
Williams, W. R. (Heston)


Lewis, T. (Southampton)
Robens, A.
Willis, E.


Lindgren, G. S.
Roberts, Goronwy (Caernarvonshire)
Wills, Mrs. E. A.


Logan, D. G.
Robinson, Kenneth (St Pancras, N.)
Woodburn, Rt. Hon. A.


Longden, F.
Rogers, G. H. R.
Wyatt, W.


Lyne, A. W.
Ross, William (Kilmarnock)
Yates, V. F.


McAdam, W.
Royle, C.



McAllister, G.
Sargood, R.
TELLERS FOR THE AYES:


McEntee, V. La. T.
Scollan, T.
Mr. Popplewell and Mr. Snow.




NOES


Amory, D. Heathcoat
Clarke, Col. R. S.
Eden, Rt. Hon. A.


Assheton, Rt. Hon. R.
Clifton-Brown, Lt.-Col G.
Erroll, F. J.


Astor, Hon. M.
Conant, Maj. R. J. E.
Fletcher, W. (Bury)


Baldwin, A. E.
Cooper-Key, E. M.
Foster, J. G. (Northwich)


Beamish, Maj. T. V. H.
Corbett, Lieut.-Col. U. (Ludlow)
Fox, Sir G.


Birch, Nigel
Crookshank, Capt. Rt. Hon. H. F. C.
Fraser, Sir I. (Lonsdale)


Boles, Lt.-Col. D. C. (Wells)
Crosthwaite-Eyre, Col. O. E.
Fyfe, Rt. Hon. Sir D. P. M.


Bowen, R.
Crowder, Capt, John E.
Gage, C.


Bower, N.
Cuthbert, W. N.
Galbraith, Cmdr. T. D. (Pollok)


Boyd-Carpenter, J. A.
Darling, Sir W. Y.
Galbraith, T. G. D. (Hillhead)


Braithwaite, Lt.-Comdr. J. G.
Digby, Simon Wingfield
Gammans, L. D.


Buchan-Hepburn, P. G. T.
Dodds-Parker, A. D.
Gates, Maj. E. E.


Butler, Rt. Hn. R. A. (S'ffr'n W'ld'n)
Dower, Col. A. V. G. (Penrith)
George, Lady M. Lloyd (Anglesey)


Carsen, E.
Drewe, C.
Glyn, Sir R.


Challen, C.
Dugdale, Maj. Sir T. (Richmond)
Gomme-Duncan, Col. A.


Channon, H.
Duthie, W. S.
Grimston, R. V.







Hannon, Sir P. (Moseley)
Mackeson, Brig. H. R.
Scott, Lord W.


Harden, J. R. E.
McKie, J. H. (Galloway)
Shephard, S. (Newark)


Hare, Hon. J. H. (Woodbridge)
Maclean, F. H. R. (Lancaster)
Smiles, Lt.-Col. Sir W.


Harris, F. W. (Croydon, N.)
Maitland, Comdr. J. W.
Snadden, W. M.


Harris, H. Wilson (Cambridge Univ.)
Marlowe, A. A. H.
Spearman, A. C. M.


Harvey, Air-Comdre. A. V.
Marples, A. E.
Stanley, Rt. Hon O.


Headlam, Lieut-Col. Rt. Hon. Sir C.
Maude, J. C.
Strauss, Henry (English Universities)


Henderson, John (Cathcart)
Mellor, Sir J.
Stuart, Rt. Hon. J. (Moray)


Hinchingbrooke, Viscount
Morris, Hopkin (Carmarthen)
Studholme, H. G.


Hogg, Hon Q.
Morrison, Rt. Hon. W. S. (Cirencester)
Sutcliffe, H.


Hollis, M. C.
Mott-Radclyffe, C. E.
Taylor, C. S. (Eastbourne)


Howard, Hon. A.
Neven-Spence, Sir B.
Teeling, William


Hudson, Rt. Hon. R. S. (Southport)
Noble, Comdr. A. H. P.
Thomas, Ivor (Keighley)


Hurd, A.
Nutting, Anthony
Thomas, J. P. L. (Hereford)


Hutchison, Lt-Cdr. Clark (Edin'gh, W.)
Odey, G. W.
Thorneycroft, G. E. P. (Monmouth)


Hutchison, Col. J. R. (Glasgow, C.)
O'Neill, Rt. Hon. Sir H.
Thornton-Kemsley, C. N.


Jeffreys, General Sir G.
Osborne, C.
Thorp, Brigadier R. A. F.


Joynson-Hicks, Hon. L. W.
Peake, Rt. Hon. O.
Touche, G. C.


Keeling, E. H.
Peto, Brig C. H. M.
Turton, R. H.


Kendall, W. D.
Pickthorn, K.
Wakefield, Sir W. W.


Langford-Holt, J.
Poole, O. B. S. (Oswestry)
Walker-Smith, D.


Law, Rt. Hon. R. K.
Prior-Palmer, Brig. O.
Ward, Hon. G. R.


Lennox-Boyd, A. T.
Raikes, H. V.
White, J. B. (Canterbury)


Linstead, H. N.
Rayner, Brig. R.
Williams, C. (Torquay)


Lipson, D. L.
Renton, D.
Williams, Gerald (Tonbridge)


Lloyd, Selwyn (Wirral)
Roberts, Emrys (Merioneth)
Winterton, Rt. Hon. Earl


Low, A. R. W.
Roberts, H. (Handsworth)
York, C.


Lucas-Tooth, Sir H.
Robinson, Roland (Blackpool, S.)



McCorquodale, Rt. Hon. M. S.
Ropner, Col. L.
TELLERS FOR THE NOES:


Macdonald, Sir P. (I. of Wight)
Ross, Sir R. D. (Londonderry)
Commander Agnew and


McFarlane, C. S.
Sanderson, Sir F.
Colonel Wheatley.

Question put accordingly, "That the Clause be read a second time."

The Committee divided: Ayes, 135; Noes, 288.

Division No. 189.]
AYES
[10.25 p.m.


Agnew, Cmdr. P. G.
Grimston, R. V.
O'Neill, Rt. Hon. Sir H.


Amory, D. Heathcoat
Hannon, Sir P. (Moseley)
Osborne, C.


Assheton, Rt. Hon. R.
Harden, J. R. E.
Peake, Rt. Hon. O.


Astor, Hon. M.
Hare, Hon. J. H. (Woodbridge)
Peto, Brig. C. H. M.


Baldwin, A. E.
Harris, F. W. (Croydon, N.)
Pickthorn, K.


Beamish Maj. T. V. H.
Harris, H. Wilson (Cambridge Univ.)
Poole, O. B. S. (Oswestry)


Birch, Nigel
Harvey, Air-Comdre. A. V.
Prior-Palmer, Brig, O.


Boles, Lt.-Col. D. C. (Wells)
Headlam, Lieut.-Col. Rt. Hon. Sir C.
Raikes, H. V.


Bowen, R.
Henderson, John (Cathcart)
Rayner, Brig. R.


Bower, N.
Hinchingbrooke, Viscount
Renton, D.


Boyd-Carpenter, J. A.
Hogg, Hon. Q.
Roberts, Emrys (Merioneth)


Braithwaite, Lt.-Comdr J. G.
Hollis, M. C.
Roberts, H. (Handsworth)


Buchan-Hepburn, P. G. T.
Howard, Hon. A.
Robinson, Roland (Blackpool, S.)


Butler, Rt. Hn. R. A. (S'ffr'n W'ld'n)
Hudson, Rt Hon. R. S. (Southport)
Ropner, Col. L.


Carson, E.
Hurd, A.
Ross, Sir R. D. (Londonderry)


Challen, C.
Hutchison, Lt-Cdr. Clark (Edin'gh, W.)
Sanderson, Sir F.


Channon, H.
Hutchison, Col. J. R. (Glasgow, C)
Scott, Lord W.


Clarke, Col. R. S.
Jeffreys, General Sir G.
Shephard, S. (Newark)


Clifton-Brown, Lt.-Col. G.
Keeling, E. H.
Smiles, Lt.-Col. Sir W.


Cooper-Key, E. M.
Kendall, W. D.
Snadden, W. M.


Corbett, Lieut.-Col. U. (Ludlow)
Langford-Holt, J.
Spearman, A. C. M.


Crookshank, Capt. Rt. Hon. H. F. C.
Law, Rt. Hon. R. K.
Stanley, Rt. Hon. O.


Crosthwaite-Eyre, Col. O. E.
Lennox-Boyd, A. T.
Strauss, Henry (English Universities)


Crowder, Capt, John E.
Linstead, H. N.
Stuart, Rt. Hon. J. (Moray)


Cuthbert, W. N.
Lipson, D. L.
Studholme, H. G.


Darling, Sir W. Y.
Lloyd, Selwyn (Wirral)
Sutcliffe, H.


Digby, Simon Wingfield
Low, A. R. W.
Taylor, C. S. (Eastbourne)


Dodds-Parker, A. D.
Lucas, Major Sir J.
Teeling, William


Drewe, C.
Lucas-Tooth, Sir H.
Thomas, J. P. L. (Hereford)


Dugdale, Maj. Sir T. (Richmond)
McCorquodale, Rt. Hon. M. S.
Thorneycroft, G. E. P. (Monmouth)


Duthie, W. S.
Macdonald, Sir P. (I. of Wight)
Thornton-Kemsley, C. N.


Eden, Rt. Hon. A.
McFarlane, C. S.
Thorp, Brigadier R. A. F.


Erroll, F. J.
Mackeson, Brig. H. R.
Touche, G. C.


Fletcher, W. (Bury)
McKie, J. H. (Galloway)
Turton, R. H.


Foster, J. G. (Northwich)
Maclean, F. M. R. (Lancaster)
Vane, W. M. F.


Fox, Sir G.
Maitland Comdr. J. W.
Wakefield, Sir W. W.


Fraser, Sir I. (Lonsdale)
Marlowe, A. A. H.
Walker-Smith, D.


Fyfe, Rt. Hon. Sir D. P. M.
Marples, A. E.
Ward, Hon. G. R.


Gage, C.
Maude, J. C.
White, J. B. (Canterbury)


Galbraith, Cmdr. T. D. (Pollok)
Mellor, Sir J.
Williams, C. (Torquay)


Galbraith, T. G. D. (Hillhead)
Morris, Hopkin (Carmarthen)
Williams, Gerald (Tonbridge)


Gammans, L. D.
Morrison, Rt. Hon. W. S. (Cirencester)
Winterton, Rt. Hon. Earl


Gates, Maj. E. E.
Mott-Radclyffe, C. E.
York, C.


George, Lady M. Lloyd (Anglesey)
Neven-Spence, Sir B.



Glyn, Sir R.
Noble, Comdr. A. H. P.
TELLERS FOR THE AYES:


Gomme-Duncan, Col. A.
Nutting, Anthony
Commander Agnew and




Colonel Wheatley.




NOES


Acland, Sir Richard
Follick, M.
McLeavy, F.


Adams, Richard (Balham)
Forman, J. C.
Macpherson, T. (Romford)


Albu, A. H.
Fraser, T. (Hamilton)
Mainwaring, W. H.


Allen, A. C. (Bosworth)
Gaitskell, Rt. Hon. H. T. N.
Mallalieu, J. P. W. (Huddersfield)


Alpass, J. H.
Gallacher, W.
Mann, Mrs. J.


Attewell, H. C.
Ganley, Mrs. C. S.
Manning, C. (Camberwell, N.)


Austin, H. Lewis
Gibbins, J.
Marquand, Rt. Hon. H. A.


Awbery, S. S.
Gibson, C. W.
Mathers, Rt. Hon George


Ayles, W. H.
Gilzean, A.
Mellish, R. J.


Ayrton Gould, Mrs. B.
Glanville, J. E. (Consett)
Messer, F.


Bacon, Miss A.
Gordon-Walker, P. C.
Middleton, Mrs L.


Baird, J.
Grey, C. F.
Millington, Wing-Comdr. E. R.


Balfour, A.
Grierson, E.
Monslow W.


Barnes, Rt. Hon. A. J.
Griffiths, D. (Rother Valley)
Moody, A. S.


Barstow, P. G.
Griffiths, Rt. Hon. J. (Llanelly)
Morley, R.


Barton, C.
Griffiths, W. D. (Moss Side)
Morris, Lt.-Col H. (Sheffield, C.)


Bechervaise, A. E.
Guest, Dr. L. Haden
Morris, P. (Swansea, W.)


Benson, G.
Gunter, R. J.
Morrison, Rt. Hon. H. (Lewisham, E.)


Berry, H.
Guy, W. H.
Mort, D. L.


Beswick, F.
Haire, John E. (Wycombe)
Moyle, A.


Bing, G. H. C.
Hale, Leslie
Murray, J. D.


Binns, J.
Hall, Rt. Hon. Glenvil
Nally, W.


Blackburn, A. R.
Hamilton, Lieut.-Col. R.
Neal, H. (Claycross)


Blenkinsop, A.
Hannan, W. (Maryhill)
Nichol, Mrs. M. E. (Bradford, N.)


Blyton, W. R.
Hardy, E. A.
Nicholls, H. R. (Stratford)


Bowdon, Fig. Offr. H. W.
Hastings, Dr. Somerville.
Noel-Baker, Rt. Hon P. J. (Derby)


Braddock, Mrs. E. M. (L'pl, Exch'ge)
Haworth, J.
Oldfield, W. H.


Braddock, T. (Mitcham)
Henderson, Rt. Hn. A. (Kingswinford)
Oliver, G. H.


Bramall, E. A.
Henderson, Joseph (Ardwick)
Orbach, M.


Brook, D. (Halifax)
Herbison, Miss M.
Paget, R. T.


Brooks, T. J. (Rothwell)
Hewitson, Capt. M.
Paling, Will T. (Dewsbury)


Broughton, Dr. A. D. D.
Hobson, C. R.
Palmer, A. M. F.


Brown, George (Belper)
Holman, P.
Pargiter, G. A.


Brown, T. J. (Ince)
Holmes, H. E. (Hemsworth)
Parker, J.


Bruce, Maj. D. W. T.
Horabin, T. L.
Parkin, B. T.


Burden, T. W.
Houghton, A. L. N. D. (Sowerby)
Paton, Mrs. F. (Rushcliffe)


Burke, W. A.
Hoy, J.
Paton, J. (Norwich)


Butler, H. W. (Hackney, S.)
Hubbard, T.
Pearson, A.


Callaghan, James
Hudson, J. H. (Ealing, W.)
Peart, T. F.


Carmichael, James
Hughes, Emrys (S. Ayr)
Poole, Cecil (Lichfield)


Chamberlain, R. A.
Hughes, Hector (Aberdeen, N.)
Porter, E. (Warrington)


Champion, A. J.
Hughes, H. D. (W'lverh'pton, W.)
Porter, G. (Leeds)


Chetwynd, G. R.
Hynd, H. (Hackney, C.)
Proctor, W. T.


Cobb, F. A.
Hynd, J. B. (Attercliffe)
Pryde, D. J.


Cocks, F. S.
Irvine, A. J. (Liverpool)
Pursey, Comdr. H.


Coldrick, W.
Irving, W. J. (Tottenham, N.)
Randall, H. E.


Collick, P.
Isaacs, Rt. Hon G. A.
Ranger, J.


Collindridge, F.
Jay, D. P. T.
Rankin, J.


Collins, V. J.
Jeger, G. (Winchester)
Rees-Williams, D. R.


Colman, Miss G. M.
Jeger, Dr. S. W. (St. Pancras, S. E.)
Reid, T. (Swindon)


Cook, T. F.
Jenkins, R. H.
Richards, R.


Cooper, G.
John, W.
Ridealgh, Mrs. M.


Corbet, Mrs. F. K. (Camb'well, N. W.)
Jones, Rt. Hon. A. C. (Shipley)
Robens, A.


Corlett, Dr. J.
Jones, D. T. (Hartlepool)
Roberts, Goronwy (Caernarvonshire)


Cove, W. G.
Jones, Elwyn (Plaistow)
Robinson, Kenneth (St. Pancras, N.)


Crawley, A.
Jones, J. H. (Bolton)
Rogers, G. H. R.


Cullen, Mrs.
Keenan, W.
Ross, William (Kilmarnock)


Daggar, G.
Key, Rt. Hon C. W.
Royle, C.


Daines, P.
Kinghorn, Sqn.-Ldr. E.
Sargood, R.


Dalton, Rt. Hon. H.
Kinley, J.
Scollan, T.


Davies, Edward (Burslem)
Kirby, B. V.
Scott-Elliot, W.


Davies, Ernest (Enfield)
Lang, G.
Segal, Dr. S.


Davies, Harold (Leek)
Lavers, S.
Shackleton, E. A. A.


Davies, Haydn (St. Pancras, S. W.)
Lee, F. (Hulme)
Sharp, Granville


Davies, S. O. (Merthyr)
Lee, Miss J. (Cannock)
Shurmer, P.


Deer, G.
Leonard, W.
Silkin, Rt. Hon. L.


Delargy, H. J.
Leslie, J. R.
Silverman, J. (Erdington)


Diamond, J.
Levy, B. W.
Silverman, S. S. (Nelson)


Dobbie, W.
Lewis, J. (Bolton)
Simmons, C. J.


Dodds, N. N.
Lewis, T. (Southampton)
Skeffington-Lodge, T. C.


Driberg, T. E. N.
Lindgren, G. S.
Skinnard, F. W.


Dugdale, J. (W. Bromwich)
Logan, D. G.
Smith, C. (Colchester)


Dye, S.
Longden, F.
Smith, S. H. (Hull, S. W.)


Ede, Rt. Hon. J. C.
Lyne, A. W.
Snow, J. W.


Edwards, W. J. (Whitechapel)
McAdam, W.
Sorensen, R. W.


Evans, Albert (Islington, W.)
McAllister, G.
Soskice, Rt. Hon Sir Frank


Evans, E. (Lowestoft)
McEntee, V. La T.
Sparks, J. A.


Evans, John (Ogmore)
McGhee, H. G.
Stross, Dr. B.


Evans, S. N. (Wednesbury)
McGovern, J.
Stubbs, A. E.


Ewart, R.
Mack, J. D.
Sylvester, G. O.


Fairhurst, F.
McKay, J. (Wallsend)
Symonds, A. L.


Farthing, W. J.
Mackay, R. W. G. (Hull, N. W.)
Taylor, R. J. (Morpeth)


Fernyhough, E.
McKinlay, A. S.
Thomas, D. F. (Aberdare)







Thomas, George (Cardiff)
Wallace, H. W. (Walthamstow, E.)
Willey, O. G. (Cleveland)


Thomas, I. O. (Wrekin)
Warbey, W. N.
Williams, D. J. (Neath)


Thomas, John R. (Dover)
Watkins, T. E.
Williams, J. L. (Kelvingrove)


Thorneycroft, Harry (Clayton)
Webb, M. (Bradford, C.)
Williams, Ronald (Wigan)


Thurtle, Ernest
Weitzman, D.
Williams, W. T. (Hammersmith, S.)


Timmons, J.
Wells, P. L. (Faversham)
Williams, W. R. (Heston)


Titterington, M. F.
West, D. G.
Willis, E.


Tolley, L.
Wheatley, Rt. Hon. John (Edin'gh, E.)
Wills, Mrs. E. A.


Tomlinson, Rt. Hon. G.
White, H. (Derbyshire, N. E.)
Woodburn, Rt. Hon. A.


Turner-Samuels, M.
Whiteley, Rt. Hon. W.
Wyatt, W.


Ungoed-Thomas, L.
Wigg, George
Yates, V. F.


Vernon, Maj. W. F.
Wilcock, Group-Capt. C. A. B.



Walker, G. H.
Wilkes, L.
TELLERS FOR THE NOES:


Wallace, G. D. (Chislehurst)
Willey, F. T. (Sunderland)
Mr. Popplewell and Mr. Wilkins.

New Clause.—(PROFITS TAX DISTRIBUTION OF GOVERNMENT STOCK AFTER NATIONALISATION.)

Where in pursuance of any enactment passed after the fifth day of April, nineteen hundred and forty-six, any securities are issued to any body corporate as or as part of the consideration for the acquisition of any property under that enactment and where that body corporate is wound up, or the capital thereof is reduced or any bonds debentures or debenture stock are redeemed, or by virtue of a scheme of re-organisation to adapt the capital employed by the corporate body to the conditions created by the compulsory acquisition of its property a special distribution of reserves is made to the shareholders with or without a reduction of capital and in connection with the winding up, reduction of capital, redemption or special distribution all or any of the securities issued as aforesaid to the body corporate are distributed to holders of the securities of the body corporate or in a case where the distribution would involve a sum less than the value of one security a distribution of cash in lieu thereof, the distribution of securities or cash shall be deemed not to be a distribution to which subsection (1) of section thirty-six of the Finance Act, 1947, would but for this section apply.—[Lieut.-Commander Braithwaite.]

Brought up, and read the First time.

Lieut.-Commander Braithwaite: I beg to move, "That the Clause be read a Second time."
This Clause raises a new point and one which is gradually emerging in respect of concerns which have paid Profits Tax and whose businesses are nationalised, wholly or in part. As the Committee are well aware, a company pays Profits Tax at 25 per cent., but if some part thereof is not distributed, it is possible to claim what is known as non-distribution relief at a rate of 15 per cent. This has the effect of making profits which are "ploughed back"—to use the popular phrase—bear a rate of 10 per cent. If in some future year distribution exceeds this profit, then, in effect, such an excess is regarded as having been paid out of the reserve, and the relief is withdrawn by means of a

surcharge upon such a distribution at 15 per cent. That is the machinery and the administration which the House approved.
Here is the point to which I call attention. When a company's business is nationalised, either wholly or in part, it receives as compensation the Government stock which may be issued at the time. A decision may be taken that it is not desired to hold this stock in the business, and it may be distributed to the shareholders; in those circumstances, I submit that what is distributed is not so much a reserve of profits made in the recent past as actual real capital originally subscribed for, built up and accumulated, before the Profits Tax was passed by this House and became operative. I submit that it is not right in cases of that sort that any surcharge should be levied by the Revenue authorities on any part of the distribution.
One has also to remember cases where the nationalisation scheme takes the form of acquiring shares in an existing company, where no such question arises. But in some cases there has been an issue of Government stock, and more recently the Government themselves have acquired shares in the business taken over. Therefore, I am sure the Committee will see that it is not equitable that the accident of the method of official take-over adopted in the nationalisation scheme should be the arbiter as to whether there is to be further Profits Tax or not.
The example I have in mind is a Bill which has not yet become an Act—the Iron and Steel Bill, which is now under consideration in another place—in which that method has been adopted. The right hon. Gentleman may recall, because I think he was concerned with the Standing Committee which considered the Bill, that discussion was not then possible. This matter is therefore being raised now, this being the first opportunity of doing so.

Colonel Hutchison: I should like to add a few words in support of what has been said by my hon. and gallant Friend. A number of anomalies are disclosing themselves in connection with nationalisation. There is the anomaly, for example, of concerns which are partly nationalised being forced to pay tax on profits which are no longer theirs. There is the anomaly, which has just been indicated by my hon. and gallant Friend, of concerns being forced to accept compensation. They never wanted to be nationalised, they did not want the compensation they are getting, but it has been forced upon them; and then they have been discouraged, particularly in the coal industry, from carrying on any form of activity at all. Holding companies were things that were discouraged. When they distribute to their old shareholders the compensation stock they have received, it is treated as though it were income and not as what it really is, capital. The law, as it stands, creates great injustices. It regards capital as income which is subjected to taxation. The Clause, which I commend to the Committee, puts right that quite obvious injustice. It is something that was not foreseen at the time of nationalisation, and it must now be put right.

Mr. Birch: I should like to say a few words of support of this new Clause. My hon. and gallant Friend the Member for Holderness (Lieut.-Commander Braithwaite) said that hon. Gentlemen opposite always required a precedent before they would do justice. There is a very good precedent for this Clause, and it is to be found in the Finance Act, 1946. In that Act it was argued that nationalisation was a matter of force majeure. What we had in mind then was the nationalisation of the Bank of England. At that time stocks were held by many insurance companies. They clearly did not intend to sell Bank of England stock, and we managed to get a provision into the 1946 Act to make it clear that no profit had been made because the Bank of England stock had been changed into Government stock.
That is on all fours with this position. What we are trying to avoid is someone being charged tax when he is not really liable to tax at all. The tax arises through nationalisation which was not willed by the company and is no fault of

theirs. As to the question of justice, one first has a business taken away—a thing which one does not want to happen—inadequate compensation is paid in stocks which are going at a discount, and then one is taxed on a profit one has not made. That combination should, I think, be too much even for hon. Gentlemen opposite.

The Solicitor-General: I confess that I think the arguments advanced in support of this new Clause are really based on a misunderstanding of the effect, or intended effect, of Sections 35 and 36 of the Finance Act, 1947, which are the Sections that define what is a distribution for the purposes of assessment of Profits Tax. Broadly speaking, whatever a company distributes must be taken into account as a distribution in respect of which either 25 per cent. or 15 per cent. has to be charged. That includes distributions in kind.
10.45 p.m.
This, however, is always subject to this limit: First, anything which is a repayment of loans or a repayment of the subscribed capital of the company cannot be treated as a distribution under either of those Sections; secondly, the limit at which a company can be charged in respect of any distribution of reserved profits under either of those Sections is the amount in respect of which it has received non-distribution relief.
The hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) explained how that operates. Briefly, if I may recapitulate what he said, if a company makes £1,000, distributes £500, and keeps £500, it is, in the first place, regarded as liable to pay 25 per cent. on the whole of the £1,000, but then it is given what has quite rightly been described as non-distribution relief at 15 per cent. on the amount it does not distribute. Therefore, in the example I am giving, it gets a credit of 15 per cent. on the £500. That is the over-riding limit beyond which no company, whether it goes into liquidation or not, can be charged. It can only be charged subject to that limit in respect of profits which it has not distributed since 1st January, 1947.
It amounts to this. Any company in 1949, whatever it distributes, either in liquidation or if it distributes its profits in specie, cannot be charged more than


25 per cent. on the amount of profits made since 1st Jan, 1947. One looks at the profit since 1947, one deducts anything which represents a repayment of subscribed capital and anything which represents a repayment on loans, and on the balance one says that the maximum that the company can be charged in respect of any such distribution as the hon. and gallant Gentleman described, would be 15 per cent.
How does that apply to nationalised companies? One has to consider two entirely different sets of circumstances. In the one case, compensation is paid direct to the company. The other class of case is where the Government stock is paid to the shareholders of the nationalised concern. The case of the electricity concern is an example. Their shares are taken over and the shareholder is given compensation in Government stock to the extent of the market value of the shares.
Let me deal with the latter case first. There can be no possible reason, I suggest, for giving any relief of the kind asked for to an ex-shareholder in a nationalised electricity concern who is simply in the position that he has exchanged an investment in stock in an electricity company and has received Government stock instead. There is no possible reason in equity, or any other reason, why he should be given any relief of the sort asked for. If it is a company which receives that stock, and if it goes into liquidation, there is no reason why it should not pay Profits Tax upon the amount it distributes in liquidation just as any other company which goes into liquidation and distributes its assets.
Now take the case of a company whose undertaking has been taken over—such as a colliery company—and which itself has received compensation in the form of Government stock. In the case of colliery companies, the way in which it works is that they get their compensation as at 1st January, 1947, and therefore receive interim income. The only amount in respect of which they could be charged Profits Tax in the event of liquidation—and that is the case contemplated primarily in this Clause—[HON. MEMBERS: "No."]—on distribution of the stock, would be 15 per cent. in respect of what they received since 1st January, 1947—that is to say, interim income.

I do not think it can be said that any exception should be made in the case of colliery companies, and that that interim income should be exempt from Profits Tax.
If a road haulage undertaking, for instance, having received compensation when the undertaking was taken over, goes into liquidation and distributes assets, somewhere in the assets it distributes is the amount of the post-1947 profits in respect of which it has received non-distributed relief. It can only be charged a sum not in excess of 15 per cent. on any post-1947 profits. When this consideration is taken into account, I cannot see that there is any reason why such companies should not be treated as any others which go into liquidation and distribute assets or reconstruct themselves under the existing conditions of Sections 35 and 36 of the Finance Act, 1947.
That is the kind of case which comes within the scope of these Sections, and there is no reason why any exception should be made of companies which are nationalised. The fact that a company is nationalised is no reason why it should be treated differently from one which goes into liquidation. It is charged Profits Tax in respect of non-distributed relief on post-1947 profits, and I should have thought that there was no reason why a company which goes into liquidation or reconstructs itself on being nationalised and distributes Government stock, in whole or in part, by way of compensation, should be taken out of the scope of these Sections. The matter is complicated and difficult to explain in detail. If hon. Gentlemen will consider the general principle underlying the Sections, they will agree that there is nothing to differentiate these companies.

Mr. R. A. Butler: If the Solicitor-General had given an explanation of this length on the previous new Clause, in which we took so much interest—that relating to education—we might have been better pleased. No one can complain that the right hon. and learned Gentleman has not given us the benefit of his advice, at such great length that we are wondering whether he is hoping to talk this Bill out. We are grateful for his description of the conditions of Sections 35 and 36 of the Finance Act, 1947, to which my hon. Friends have


turned attention. One must never underestimate the value of giving a case clearly. The Solicitor-General devoted a considerable time to dealing with the case put by my hon. and gallant Friend who moved the new Clause, and who actually said that no such question arises where the scheme of nationalisation takes the form of acquiring the shares in an existing company. That was the Solicitor-General's second example, which he took some time in demolishing; but there was no need to raise that point or to demolish it, because my hon. and gallant Friend had already demolished it. Therefore, the Solicitor-General might well have saved himself the trouble.

The Solicitor-General: It is covered by the Clause, and I had therefore to deal with it.

Mr. Butler: My hon. and gallant Friend drew attention to the matter in his speech, which might have shortened the general discussion. What has struck us about the whole matter is that the accident of the method adopted in the nationalisation schemes seems to make a differentiation between one type of scheme and another, and what we have been particularly interested in is the question which has arisen in the passage of the Iron and Steel Bill and which it has not been possible to discuss on that Bill.
I do not think that my hon. and gallant Friend desires to press this matter to a Division, but we should like the Government carefully to examine any points that have been raised and any points that may subsequently be raised by hon. Members on this side of the Committee. What we are particularly anxious about is that what a company is distributing, not only in the event of liquidation but perhaps in other events, is not so much its reserve of profits made in the past, which has had the benefit of non-distributed relief, as its real capital originally subscribed or built up before Profits Tax existed. Although the Solicitor-General has referred to the extent of profits since 1947, I do not think that he has completely put the point I have made.

Mr. David Renton: This is not an easy matter to understand and I must say I was somewhat confused about the main principle underlying the

Solicitor-General's remarks. As I understood him, he was asking us to say that there is no substantial difference in principle between a concern which is brought to an end on nationalisation and any other concern which goes into liquidation. But I suggest that there must be some distinction.

The Solicitor-General: So far as Profits Tax is concerned.

Mr. Renton: So far as Profits Tax is concerned. I understand that qualification, as naturally one would, discussing this Clause which deals with Profits Tax. But surely when a concern other than a nationalised concern goes into liquidation, it does so with assets in excess of capital to distribute or without assets in excess of capital. If there are no assets in excess of capital, presumably the Profits Tax does not apply. I am subject to correction if I am wrong, but if there are assets in excess of capital, obviously the Profits Tax must apply and it is there that we have to begin to apply the analogy with regard to compensation on nationalisation.
The compensation on nationalisation, the Solicitor-General says, must be distributed in all cases as though it were distributed profits. Surely that overlooks the fact which was being made by the right hon. Member for Saffron Walden (Mr. Butler) just now, that as often as not—and this applies particularly to the smaller transport concerns which were compulsorily acquired—the compensation represents merely the distribution among the members of a family business of the capital which they have raised, very frequently by borrowing at the bank or by raising debentures on the capital they have put into the business. If there is an element of profit about the matter, it will not as a rule be taken into consideration in assessing compensation.
11.0 p.m.
Under the terms of the Transport Act, with regard to the compulsory acquisition of the smaller businesses, the first duty of the authority which is assessing the compensation is to inquire into the capital value of the business, and it is on that capital value that compensation is paid. Compensation is not being paid on the basis of recently-earned profits. Therefore, I suggest that it is quite wrong to make a provision of law that compensation distributed, being com-


pensation representing capital, should be treated as though it were distribution of profits and taxable as such.
This is a difficult matter, and probably I have not made myself clear, but if there is anything in the submissions which I have made, I suggest that the matter is worthy of further consideration, because it affects a very large number of people already and it will affect an increasingly larger number of people in the lamentable event of the nationalisation of the steel industry. This is a matter which the Government should not treat lightly. The Solicitor-General, to do him credit, has not treated it lightly. He has attempted to put forward arguments, which were to his mind convincing but which were at the same time complicated, and which affect the rights of a large number of people who have exceedingly little hope of understanding what all these arguments mean. For those reasons, I submit that this matter should not be allowed to fade away in obscurity, in the heat of this evening's temperature, but that we should hear much more about it on the Report stage.

Mr. Gallacher: I want to say a word which is quite outside my province. I gather that there is an anomaly in connection with the nationalised industries. I am of the opinion that such an anomaly should not exist. An hon. Member has said that when industries are taken over they are forced to take compensation which they do not want. That is a shame. I suggest that they stand on their sturdy independence and refuse the compensation, and then the anomaly will disappear.

Colonel Haughton: At the start of his speech, the Solicitor-General spoke of distribution in kind. We ought to know exactly what he meant by that. Throughout the length of a complicated speech, he postulated the suggestion that, as regards Profits Tax, taking over a business under a scheme of nationalisation was exactly the same thing as voluntary liquidation. I suggest that the similarity is as great as it is in the case of shaking somebody by the hand when he comes to one's house and kicking him out of the front door and saying "It is all the same thing as regards the weather." The Solicitor-General should explain what he

meant when he spoke of distribution in kind. Also, does he really suggest that the taking over of a business under a scheme of nationalisation is exactly the same as a company going into voluntary liquidation?

Mr. Birch: The fog seems still to be rising in the Chamber as a result of the speech of the Solicitor-General. I want to bring the Committee back to the main point which my hon. and gallant Friend had in mind when he was moving the Clause. I believe that I can do it most simply by giving an example. Let us suppose the iron and steel industry is nationalised. Under that Bill, a subsidiary of Vickers is nationalised, that subsidiary is not a very large part of Vickers' business, but it will be nationalised and bring into Vickers a lot of Government stock which they may or may not want to take in cash. Suppose that in future years Vickers decide to make a special distribution of reserves because they do not need that money in the business; suppose that in the year that is done their total distribution does exceed the profits made in that particular year. Then, as I understand, under the existing law, the excess would be considered to have been paint out of reserves which had benefited from the non-distribution relief. As this is not a very large part of the business, the whole of this special distribution might very well fall to be mulcted in this additional Profits Tax. That we hold to be unfair.

The Solicitor-General: But it would be subject to the amount in respect of which they received non-distribution relief.

Mr. Birch: But the point is that the profits of the parent company are large in proportion to this particular business, and therefore the whole of this distribution might very well be less than the amount of relief they received previously, since 1947. That would be unfair because in fact what they would be distributing would not be recent profits subject to this particular tax, but capital which had been subcsribed in the past before this tax was thought of. That was the point of my hon. Friend, and it is a clear case of something being unjust. If I have got it right, there is a strong case here.

The Solicitor-General: This Clause does assume that what is distributed only


comes out of pre-1947 accumulated profits, and that is just where it is misconceived.

Lieut.-Commander Braithwaite: As the mover of this Clause, while I am unable to describe myself as satisfied, I do realise that there are further matters which it is desirable to discuss before the atmosphere of the Committee becomes too soporific, and that I must deprive hon. Members of the chance of improving their batting average. I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(RELIEF OF PROFITS TAX ON RESERVED PROFITS.)

Subsection (2) of section thirty of the Finance Act, 1947, as amended by section seven of the Finance (No. 2) Act, 1947, shall be amended by the omission of the word "fifteen" and the insertion of the word "twenty-five."

And in subsection (3) of section thirty-six of the Finance Act, 1947 (which as amended by subsection (2) of section seven of the Finance (No. 2) Act, 1947, contains an incidental reference to the rate of tax) for the words "fifteen per cent.," there shall be substituted the words "twenty-five per cent."

And subsection (3) of the said section thirty shall be amended by the omission of the words "at the rate of fifteen per cent. on the amount of the difference" and the insertion of the words "at a rate equal to the rate of non-distribution relief obtained on those profits." For this purpose the excess of the net relevant distributions over the profits chargeable to profits tax for any chargeable accounting period shall be deemed to have been distributed out of the profits of the next preceding chargeable accounting period on which non-distribution relief was obtained and if those profits are insufficient then out of the profits of the next but one preceding chargeable accounting period in which non-distribution relief was obtained and so on as may be necessary.—[Mr. R. A. Butler.]

Brought up, and read the First time.

Mr. R. A. Butler: I beg to move, "That the Clause be read a Second time."
This raises an important issue to which we drew attention when we were discussing depreciation allowances earlier in the course of this Bill. We were all obliged then, and indeed grateful, to the Chancellor of the Exchequer for the depreciation allowances to help industry in its very important task which he has recognised by making those allowances. We also acknowledge that an inquiry is taking place into the cost of depreciation, or wear and tear, which we put in the

course of those Debates as being some three times what it was in 1938. We then said we were reserving for this new Clause the main issue of some special allowances to enable industry to meet this very heavy burden. This Clause does not provide for a special allowance—it provides for the relief of profits tax on undistributed profits.
The first question that we need to ask, therefore, is whether there is a case for State help in this sphere. My answer is that the equipment of industry, the provision of the newest machinery and tools, influences more than any other issue our competitive power in the export markets. I put it to the Government as follows: if the State does not help in the type of way we suggest in this Clause, it will have to help in another way. Therefore, the burden will have to fall on the taxpayer at some time or other, at any rate in a large section of the industrial front. If the Financial Secretary does not believe my words, I draw his attention to what has already happened in the cotton industry, where in the spinning side a substantial subsidy has had to be provided to re-equip that industry. It is not impossible that similar State help will have to be provided in the weaving side at some date. The matter has got out of the control of the organisers and owners of the industry, and the State has had to step in and impose an extra burden on the taxpayer, involving a substantial sum.
There is also the point of view of the workers. Without proper equipment and new tools the workers cannot compete as they should, nor be relieved of toil, nor enter into competition with the foreigner by employing the latest shift systems, or in any other way. Whichever way one looks at it, the question of the replacement of the machinery and tools of a business is one of vital interest to the State, and in at least one major instance—which I have quoted—has come on to the State as a very considerable burden.
If I have proved that there is a need for State help, I should then like to ask what the State does in regard to undistributed profits, the major object of collecting which is to meet these very problems of depreciation and replacement of machinery. The State first asks the business man, or employer, to limit his dividends, and in the vast majority of cases—


as the Chancellor would be able to state if he were here—there has been a satisfactory response from industry in regard to this limitation of dividends. At the same time, the Chancellor says to the business man, "While you are limiting your dividends, and doing what I say about not distributing your extra profits"—although in equity the shareholders have, in our view, a right to greater dividends—"yet I am going to tax these very undistributed profits which you ought to keep for replacement of your machinery and plant."
In the United States we find that while they have larger allowances for the smaller businesses than we have, they also have less taxation than we do on undistributed profits. We see, therefore, that there is a strong case for relieving undistributed profits designed to be put back for the depreciation of plant and wear and tear. Without going into details, our Clause is so drafted that there can be no hanky-panky about first putting money to undistributed profits and then distributing it. At least that is what was in our minds. The situation has not been made easier by the language of the Economic Secretary to the Treasury in the earlier Debates on this matter. He put forward the astonishing argument that if there was to be any removal of tax on undistributed profits it would do away with profit-sharing between employer and employed. I regard that as a very impertinent remark from this Government, after they have done away with some of the most notable among profit-sharing schemes when they nationalised gas.
We on this side have genuine interest in proper profit-sharing. It would be regarded as impertinent by any section of the working population if we were to tell them that the tax on undistributed profits was equivalent to a proper profit-sharing scheme. I hope that demolishes the argument of the Economic Secretary. It is said that profits put to reserve have increased since 1938. Looking at the national income White Paper, it is the case that the figure this year is substantially larger than the figure for 1938.
11.15 p.m.
I give credit to the hon. Member for Norwood (Mr. Chamberlain) who raised this matter when I was speaking before. I have since had the opportunity to look

into it more closely than I had on that occasion. According to the White Paper, the figures are as the hon. Member stated. First, I would remind the Committee of the remarks of the Chancellor of the Exchequer at Workington, which I quoted earlier, that a large part of the so-called profit it not a pure surplus, but must be put to reserve to pay for the replacement and repair of plant and machines, and for industrial expansion to meet the new production needs.
I quote this again because that is exactly our case. We have to look at the Chancellor of the Exchequer when he is in the role of talking sense about profits and when he is in the role of talking nonsense, as he did on the Second Reading of the Finance Bill in this House. We have to look at him when he is trying to get votes for his Party, and when he is the honest man whom we prefer to see. We have to acknowledge that the speech he made in his honest guise at Workington gave us the whole of our case. I could examine at length the position regarding undistributed profits. The President of the Federation of British Industries recently estimated the deficiency in the need for creating a sum for depreciation allowance in 1948 at about £300 million. If we take that figure—and I could quote a much larger figure from another authority—it reduces the £545 million figure alloted to this in the White Paper to £250 million.
Taking still another independent source—the Bulletin of the London and Cambridge Economic Service—the amount required to maintain the volume of supplies at the increased prices in industry is about £150 million in 1948. If we add these two figures together, we find that the amount being put to undistributed profits and reserves in 1948 is £100 million, compared with £170 million in 1938. That is the answer to the hon. Member for Norwood, who interrupted me in a previous Debate. These arguments, so loosely used, about there being an absolutely indefinite well of undistributed profits and reserves, are not borne out by the facts.
The main fact facing industry today is the great increase in costs. When I last spoke on this matter I said that the increase was approximately three times the cost of 1938. One is criticised when one makes a statement like that; but since I made that statement, I have received


many letters and indications supporting the view I expressed, that costs are between two and three-quarters and three times those of 1938. When I take my figure, that is, after putting £150 million to maintain the volume of stocks, and after putting the figure which I did for the deficiency in the creation of a pool for depreciation allowances of £250 million, we find that, in fact, despite the need for a production drive, there is less being put to reserve by £70 million now than there was in 1938.
We claim, therefore, that despite the attempt of the Chancellor of the Exchequer to help industry by depreciation allowances, there is, in fact, a severe problem for the industrial world facing us at this moment. We have therefore thought it right to take the opportunity offered by the Finance Bill to put forward this argument in a legitimate manner, and to ask the Government to try to meet us on a tax which we think is not equitable, and is not serving the proper needs of production by giving incentives to those who are doing their duty by the Chancellor of the Exchequer.

Mr. Glenvil Hall: The point here is really a very narrow one, if I understand the right hon. Gentleman aright. As I understand him, the object of the Clause he has moved, is to provide that the Profits Tax shall be removed altogether from undistributed profits. As the Committee knows, the Profits Tax at present is 25 per cent., with a relief of 15 per cent. for the profits which are not distributed. Hon. Members opposite were reminded a short time ago by the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite), and his right hon. Friend has just said, that, over a very wide field, industry has responded to the request of my right hon. and learned Friend the Chancellor that dividends should be limited; and that, I think, is quite true, but I cannot see what that has to do with this particular matter.
Here, as I have said, we are dealing with a very narrow point. The question of whether profits not distributed should, in effect, escape Profits Tax altogether, is one which I do not think could be described otherwise than as important. After all, the profits have been made, and the mere fact that they are not distributed does not make them anything but profits. Furthermore, all of us have to bear our

share of what is, admittedly, heavy taxation on what we make, or what we receive, unless there is special reason, and undistributed profits should bear their share of this taxation. Reserves are of no use unless they are put to some use in the business. It may well be that where profits are not distributed, and are just left to reserve, neither good nor harm will result.
The right hon. Gentleman obviously realises that by the way in which he has worded his Clause, and by the remarks which he has just made. The question arises whether, when profits are not distributed, as the Chancellor and, I think, most thinking people desire, they are put to proper use by being ploughed back to re-equip with new buildings or new plant and machinery the particular organisation concerned. It is the view of my right hon. and learned Friend that this difference of 15 per cent. is not only an incentive to the company concerned not to distribute, but also an incentive to use it in the way in which it should be used, namely, to instal new plant and machinery.
The right hon. Gentleman the Member for Saffron Walden (Mr. R. A. Butler) did mention what we are doing in Clause 16, and I think that there are limits to what can be done to help industry in this direction. I was taught that temperance in all things is desirable, but right hon. and hon. Members opposite do let some of their views run away with them. When it comes to the taxation of profits, we are already giving a 15 per cent. relief and if they use the money as they should, to re-equip their industry, we have made a further concession by doubling the initial allowance in this very Bill; but, like Oliver Twist, they come back for more, asking for undistributed profits to be wholly exempted.

Mr. R. A. Butler: We cannot ask for more in the case of depreciation allowance, but the allowances under Clause 16 are in no sense a gift. They are also an advantage to the big firm, rather than the small firm. The Chancellor has made no gift to industry; he has simply made an advance.

Mr. Glenvil Hall: It is nevertheless a gift. It is an allowance which, if the provision were not there, industry would not get, and that money would in fact flow into the Exchequer instead of


remaining in industry. It is true that over a long period they will not get any greater allowance than otherwise they would have got, but that they are getting an allowance is beyond question and that they are getting a double allowance in the initial period is obvious. To pretend that industry is getting nothing is quite absurd. One last point: the proposal, if accepted, would cost £105 million or £58 million when Income Tax is taken into consideration. I hope that I have only to mention those figures, to show the Committee that it is quite impossible for the proposal now put forward to be accepted.

Several Hon. Members: Several Hon. Members rose—

The Chairman: I hope the Committee will soon come to a decision.

Mr. Frederic Harris: I just cannot understand the Government's attitude on this matter at all. The attitude they are taking now is that this proposal will cost £58 million. A little while ago they turned down a proposal because it would cost £3½ million. It does not matter what sum it is, we always find that the increased cost will hit any concession the Government might give. Cannot they understand for one moment that industry must have much more material assistance at the present time? Such an allowance as would be given here, if the Government had the sense to provide it, would most definitely be used for the benefit of taxation as a whole because industry in this country today needs much more help to be able to plough back and build up machinery and resources.
At the present time we are being completely over-taxed. There is hardly a business which is not paying 60 per cent. in taxation. Unless this concession is eventually given by the Government, in the end we shall be put into a quite impossible position and will lose our export markets. There can be no doubt about that. Industry is suffering at the present moment, as many of us are, from complete over-burdening by taxation. Suggestions have been put forward for concessions by this side of the Committee for help to assist industry. We have been appealing for a very large section of traders but we have had no assistance and no help has been given by the Government of any kind whatever. If

the Financial Secretary does not believe us perhaps he will tell us.

Mr. Glenvil Hall: I know that the hon. Member has not been in this Parliament from its commencement but if he will go into the Library and look at the Finance Acts he will find that they are littered with Sections which give help to industry.

Mr. Harris: With the greatest respect, I know I have not had the great privilege of having served as long as many other hon. Members but I have had to put into practice a job of work in industry. If the Government had given the concessions to which the right hon. Gentleman has referred—and I challenge him to show anything substantial in the last few years—one would have felt it in industry. They have not. The Government will not face up to the fact that in the last 12 months the position has become increasingly more difficult. That is why industry, whether small or large, needs more financial concessions from the Government.
The Government are taking a very short-sighted view and are doing great harm to industry and the country. In the end they will find that because of this lack of assistance and the non-granting of any single concession we shall be losing export markets in one country after another. I appeal to the Government to realise that they must not take a short-sighted view. Will they please study the industrial situation? We have no one there who looks at it from an industrial point of view. That is what we want. We do not want legal arguments on whether we can dodge this or that on the question of expense. Sometimes expense can be put on one side when one takes a long-term view of the situation.

11.30 p.m.

Mr. Erroll: I do appreciate the desire which has been shown by the Committee to carry on with its business as rapidly as possible but I would represent with great respect, that this is a matter of great importance as demonstrated by the number of hon. Members who want to speak on this subject. But I will try to be as brief as possible. When the Financial Secretary referred to us as coming forward like Oliver Twist for a second helping did he mean to suggest that Oliver Twist did not deserve a second helping?

Mr. Glenvil Hall: We would not mind if hon. Members opposite only came for one second helping, but they always want everything that they can lay their hands on.

Mr. Erroll: There is a great difference of approach on the two sides of the Committee, and that, we on this side, certainly recognise. I would urge hon. Members opposite to try to approach this matter in a judicial spirit of inquiry, and I suggest that they discuss this matter with some of their hon. Friends who are actively engaged in running a business enterprise today, such as the hon. Member for Ipswich (Mr. Stokes) or the hon. Member for one of the Hull Divisions who was here a moment ago, or possibly the hon. Member for Blackley (Mr. Diamond), or one of the two hon. Members for Bolton, all of whom know that we are not here in any grasping manner to try to get more and more for industry, but that we are trying to plead for a proper retention in industry of unspent earnings which are to be ploughed back into the business.
Just because for the purposes of tax computation, or out of the habits of the past, certain moneys accruing in an industry are called profits, it is no reason for hon. Members opposite to laugh or sneer at them. They represent earnings which are not spent on wages or raw materials—earnings which, although they may be subject to tax on the basis of Inland Revenue computations, are, nevertheless, desperately required for the improvement of the business itself. On all sides of the Committee we recognise the need for ploughing back what are called profits. What are called undistributed profits are indeed unspent earnings which are required today under three separate headings. The first is the "replacement of plant and machinery." That is a popular phrase with hon. Members opposite at the moment, but plant and machinery represent by no means the only requirement for which money is needed. There are also new buildings, which are to be specifically denied any relief under the terms of Clause 16, which affords nothing more than a short-term tax-free loan. That is certainly not a gift although the Financial Secretary has tried to make out that it is.
Then there is the difficult problem of the increase in the value of stocks, which

have occurred in the last few years and for which the money is required. Without blaming anyone for the inflation which has taken place—and I am giving the Government credit where credit is due for damping down inflationary tendencies—the fact is that there have been inflationary tendencies and industry has "taken it on the chin." Do give industry a chance to finance new stocks on new plants, and a chance to meet the cost of the increased work in progress. Due to many causes—not only the congestion in the shops and the slower rate of output—more money is generally required to maintain assets, to keep businesses as good, going concerns.
These unspent earnings, which should be used for that purpose, are taxed at a time when the Lord President of the Council says that enterprises must be enterprising, taxed at a time when the Lord President of the Council—never himself a very great adventurer—calls on all men to be great merchant adventurers. One thing which annoys us on this side of the Committee is the constant exhortation by Members opposite to industry to be enterprising. When hon. Members on this side ask for the means, we are greeted with sneers, taunts and jeers of the Financial Secretary regarding industry as an "Oliver Twist." If they go on this way much longer, industry will be little more than an Oliver Twist.

Mr. Stokes: As I have been challenged, I should like to add a little to the Committee's discussion, particularly with regard to what the hon. Member for Altrincham and Sale (Mr. Erroll) has just said. I think his mind is completely confused. There is a great difference between money required for development and financing stocks. So far as my experience goes, on the whole, the increased money required for financing stocks is taken care of by rising prices. The hon. Member for North Croydon (Mr. Frederic Harris) said that the Government had done nothing to help industry. In my 27 years' experience as a production engineer, no Government has done more to help industry than the present Government.

Mr. Erroll: The particular commodities have not been subjected to any form of price control.

Mr. Stokes: On the contrary, all through the war I worked constantly to get a form of costing more adequate than that in which the then Government indulged. A more enlightened Government got rid of that type of control and now I am free to go my own way. But I do not regard this point as very important. The observation made by the hon. Member for North Croydon was that the Government have done nothing to help. It simply is not true. No Tory Government in the past did one quarter as much to help industry, and we now find ourselves in an entirely different position in the manufacturing world.

Mr. Frederic Harris: Would the hon. Member give me two really good instances in which the present Government have really helped industry?

Mr. Stokes: To start—never before have we had any real provision for writing off our buildings and premises. None whatever.

Mr. Eccles: The provision was made under an Income Tax Measure brought in by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson). Will the hon. Member please not talk nonsense?

Mr. Stokes: That was a beginning, but it has got much better since. Certainly, it was a joint effort, but it must have been due to the inspiration of my right hon. Friends in the Government. Secondly, depreciation allowances are much better than ever before. If hon. Members will add that up they will find that this country today is as well off as the Americans in depreciation allowances and provisions out of profits. We are really, for the first time in my industry, what I call "fighting on par" with our American competitors.

Mr. Frederic Harris: Is the hon. Member really expecting to get away with this, because what of the cost of a replacement?

Mr. Stokes: I know all about what is happening in America, too. Does the hon. Member really think that that antiquated system of monopoly competition is allowing prices to remain stable? Not on your life. Prices over there are soaring right through the roof and the hon. Member knows it perfectly well. If one tries to buy a machine tool in America

today, he buys it at just about three times the price it was at the end of the war. I do not think it is germane to the discussion. The honest fact is that the present Government have managed to keep prices reasonably down, have increased allowances, and industry today is better provided for by the Chancellor of the Exchequer in the provisions of the Finance Act than before.

Colonel Haughton: I should like to follow the hon. Member for Ipswich (Mr. Stokes). He says he knows all about what is going on in America, and if I may take that in a literal way, I think I can refute that. My nephew brought me back last night by air the "Gazette" from Montreal and as the hon. Member is so familiar with the attitude in North America, he might be interested to hear what the leading article said:
It is questionable, however, whether capital investment is to be broadened and encouraged by cutting down the amount of capital available for investment. Yet this seems to be the Labour Government's aim. 'We have certainly got to reduce prices,' Sir Stafford has said in the House of Commons, 'and that we can do by a greater degree of efficiency and a smaller degree of profits.'
The fact is, however, that the machinery needed to increase efficiency can come only out of profits. And the profits at present left after taxation are far from sufficient for this job.

Mr. Stokes: Before the hon. and gallant Member sits down, will he point out to me one single unit in the heavy engineering trade where the advantages, in fact, are not indeed much better today than they were three years ago?

Colonel Haughton: I am prepared to do that. There is no difficulty about it. We have got, as the Financial Secretary said, this 40 per cent. allowance, which is something in advance, as it were, on allowance depreciation. But the Member for Ipswich knows perfectly well that the replacement value on equipment, plus—and I think it is very important in view of the lectures we have had from Ministers opposite—modernisation of plant, and the utilisation of research which may require a complete replacement of equipment, has all to be taken into consideration when we are assessing the amount of money that will be required in international competition. He has dealt with the heavy side of the industry, and, knowing the business man he is, he will not find fault with me I know for taking a light equipment for an example.
Take, for instance, spun glass which now we know can be converted into glass tape. That will revolutionise the manufacture of television sets and radio equipment. It is within measurable distance when we shall have little portable sets almost the size of a post-card, largely due to that, and when I say that we require more money in research for replacement, I am also thinking of modernisation of plant and taking advantage of research and invention. But, as I said, I tried to follow directly upon the hon. Member for Ipswich, because he stated to the Committee that he knew all about the position in America and I wished therefore to quote the leading article from the "Gazette," Montreal.

11.45 p.m.

Mr. Albu: It seems to me that there are considerations of principle and expediency here. The hon. Gentlemen opposite who spoke, including the right hon. Gentleman who opened the discussion, have been dealing with the matter entirely in terms of expediency. It is fairly easy for those of us who have industrial experience to get a reputation with hon. Members opposite for being practical men if we forget our principles. I want to show that it is not necessary for us to do so, for the very good reason that, as has been clearly shown through the whole Debate, the differences between us on this matter of principle are very great indeed.
On every single issue, on every Amendment and on every new Clause the Opposition have been trying to revoke the tendency the Government have put into operation of redistributing the national income and the national wealth. In the whole discussion one would not have thought that profits were going to come into the pockets of individuals. The facts are that the gross profits of companies at the present time, as shown by the "Economist" sample index, is over 15 per cent. on the real capital value of shares. Profits have gone up from 12 to 17 per cent. of the national income in the 10 years before 1948. These profits represent a very high rate on turnover; even more important from the point of view of competition and the standard of living. They represent at the moment something like 16 per cent., which I believe is about double the rate of gross profit for turnover applying

to similar companies in the United States. In the end, the ordinary shareholders are going to reap the benefit.
It is difficult to see how much the ordinary shareholders have benefited over the last 20, 30 or 40 years.
From the figures it looks as if the value of the assets from which the dividends to ordinary shareholders are paid have gone up three times on their original nominal value. I have a list of 15 large public companies taken at random, and looking at the figures over the last 15 years, I find that the average value of ordinary shares is one and a half to nine times the nominal value, and I do not know how many bonus shares have been issued. Only five companies during that 15-year period, which includes the whole of the war period, have gone below the nominal value of the shares and today two-thirds stand at over three times the nominal value. On the present value of the shares capital appreciation for individuals takes the place of dividends paid to individuals.
On the question of benefit, if we are to continue the principle of the redistribution of wealth and income, I do not think the Members of the Opposition have any argument at all. On these very high prices for shares—the average dividend is 8 per cent.—5 per cent. after tax. This goes to the ordinary shareholders in public companies, who play no part whatsoever in the business of these companies.
On the grounds of expediency, on which Members opposite have based their arguments, there is sufficient for replacement, if not for expansion. The net current assets of these 15 companies have gone up from £395 million to £422 million, including an increase of reserves of £33 million, and we know that the White Paper indicated an increase in company reserves in the last year from 4.9 per cent. to 5.6 per cent. of the national income. At the present time reserves for replacement are made from current profits and the Chancellor of the Exchequer has already dealt generously with the difficulty of replacement due to increased costs during the war. I have just read an article in the "Economist" which points out that in actual fact it will be equivalent to an interest-free loan of £650 million. I presume that the interest is therefore a free gift to industry.
Again quoting the "Economist," which is not really very favourably disposed towards redistribution of income and, on the whole, takes the view that we should return to the days of rather greater differentiation between the wealthier and poorer sections of the community, it says that there are no signs of strain. I presume that means, as my hon. Friend the Member for Ipswich (Mr. Stokes) has pointed out, that industry is not really short of reserves, at any rate for replacements. The question of expansion is another matter.
If the Opposition really mean what they say about a property-owning democracy, I should have thought that they would have supported the idea that industries should go to the market. There is no difficulty about industry raising capital in the market at the present time. If there is, there are other ways by which money can be raised.

Mr. Erroll: The hon. Member should give that advice to his clients.

Mr. Albu: I do not get the hon. Member's point. I was dealing with large public companies. Hon. Members opposite brought forward a Clause to relieve the smaller private companies. I believe that this is a matter which might very well be dealt with by the Profits Tax Committee, and I believe that there is some justification for looking at the matter afresh. On the general question of the major part of our industry, the large public companies, there is no justification whatever for a reduction in profits tax.

Mr. Norman Bower: I admit that there is some substance in the point put by the hon. Member for Edmonton (Mr. Albu), that at any rate a proportion of the profits put to reserve ultimately come into the hands of the shareholders, but I should have thought that if it is considered necessary to deal with it on the grounds put forward by the hon. Member—of redistributing wealth and the national income—the way would be to increase the tax on distributed profits at some later date. That point does not seem to have any bearing on the Clause or constitute any answer to what we are proposing.
I only intervene because the attitude displayed by the Government, and particularly by the Financial Secretary,

rather shocks me. One of the reasons why the Government introduced the principle of dividend limitation—not the only reason but certainly one of them—was that they wanted profits to be ploughed back into industry because they considered that was a right and good thing from the point of view of the country. It is true that they have given some assistance in that direction by means of the different rates of Profits Tax chargeable on distributed and undistributed profits, but now that we come along and ask them to give some more assistance, they refuse to do so, apparently on the principle enunciated by the Financial Secretary that temperance is something to be encouraged in all things.
I would only remind him that we are running into difficult times, and that the prospects of maintaining employment, the social services and everything else depends on the success of industry. To suggest in those circumstances that temperance is a thing which ought to be encouraged in deciding how much assistance one should give to industry seems to display an absolutely fantastic and utterly deplorable outlook.

Major Bruce: The remarks advanced by the Opposition for the Clause, voiced largely by the hon. Member for Altrincham and Sale (Mr. Erroll) were to the effect that industry is in need of extra funds for the purpose of capital investment. That is the broad general case. I know the hon. Gentleman referred to stocks, but a good deal of his emphasis was in relation to capital investment. I do think the Opposition ought to take the Committee into their confidence in this matter. If it be so that industry requires this terrific amount of extra money for capital investment it must mean that the Opposition are committed in favour of increasing the capital investment programme, a programme which is at the moment absorbing something like 22 per cent. of the national product.
This is something we can never get from the Opposition. If what the hon. Gentleman says at the moment is perfectly true, it means the Opposition wants to enlarge the £400 million which in the 1947 plan was to be devoted to capital investment during the current year, by another £50 million or £100 million. This is rather odd coming from the Oppo-


sition, because when unemployment was standing at 365,000 Lord Woolton said that there should be a drastic cutting-down of capital investment in this country. Unemployment now stands at about 325,000. Is it the attitude of the Opposition now that we should increase capital investment, or, in fact, decrease it? Would the hon. Gentleman the Member for Altrincham like to answer that point initially?

Mr. Erroll: I was referring to the drain on industry rather than to capital investment.

Major Bruce: The hon. Gentleman's remarks are on the record, and he referred to the necessity for replacement and for new buildings. Hon. Gentlemen cannot really have it both ways. One of the very droll things about the Opposition in matters of this kind is that for some reason they seem to think they represent industry. "These things are an insult to industry," they say, as if industry consisted only of directors and owners. Industry consists of the workers, managers, and technicians as well as directors and owners, and it certainly does not lie in the mouths of the Opposition to arrogate to themselves the right to refer to a few limited people as being industry as such.
From time to time they pride themselves, with certain justification, that industry—and they mean the owners—is using considerable self-restraint in the declaration and distribution of profits. The Chancellor of the Exchequer has already referred to this many times, and he says, by and large, industrialists are adhering to the arrangement proposed by the Prime Minister in the White Paper of 1947. But the Opposition seem to claim this as a virtue. They seem to suggest that if industry really liked, and voluntary discipline was relaxed, it would distribute more dividends than has been done. But in fact, as everyone knows, industry is indeed very well served with profits at the present time. Moreover, the funds at the disposal of industry for the replacement of assets are quite adequate enough to enable that measure of replacement to take place within the Government's capital investment programme, which has not been criticised up to now by the Opposition. In fact, the Opposition still do not know whether they want to increase it or decrease it, and until they

make up their minds, they should not put down Clauses of this kind.

12 m.

Sir Ian Fraser: The Financial Secretary has said that reserves are no good unless one actually spends them on replacement, implying that the only function of reserves, and the only justification for building them up, is that one should spend them immediately, or within a measurable time, on replacement of obsolete machinery. I want to tell him of a business—which I do not want to identify, although I do not mind telling the details of it if I am pressed—which I know very well, where the reserves have another and very important function. It is a business that makes high profits, higher than it has been making for many years past, but the directors would be immeasurably glad if they were able to make the modest and regular profits they made before the war, and which they have made for over 100 years, and if they were able to set aside in their reserves a sufficient sum to guarantee them against the hazards of this coming year. The higher profits they have been making in the past two or three years are no safeguard whatever to them.
This business uses an expensive and valuable material. The price of it may be some hundreds of pounds a ton, and it has been rising rapidly over the past three or four years. The nominal capital may be £500,000. Normally a certain stock of this raw material is required to take care of the failure of shipments, or because the business cannot be sure always of getting what it wants at the time it wants it. But in addition, a substantial stock, in normal times valued at some hundreds of thousands of pounds, is in the process of being converted from one thing to another; it is called "intermediate" because it is intermediate between the raw material and the finished product. In the last few years the whole picture has changed. Higher profits are made on a rising market; the same dividend is declared; and there is nothing left by the time the firm has paid taxation, to put to reserve to take care of the fall in the commodity which is the basis of its business life.
The business is faced with an enormous fall which has already begun in the United States, is travelling round the


world, and, in spite of the efforts of the Government to keep it under control has begun to fall here. Some hundreds of pounds a ton will come off the value of this material, leaving the industry with three or four times its nominal capital in raw material, against which it has no reserves, and there is no free market in which it can hedge. The only way we can have our anxieties relieved is by being able to create reserves, which theoretically inure to the benefit of the shareholders, but which in fact will be used for the purpose of saving us acute embarrassment when this fall comes in the next year.
It may or may not be a good thing to tax profits at 25 per cent.—I do not want to argue that now—but I am convinced that it is not in the national interest to tax reserves. They may theoretically be the property of and may in the end inure to the advantage of individuals. That in itself is not a crime. It is an advantage. The more individuals there are who have wealth and profits and potential profits, the more there is to go round, and the more employment and development there is. But be that as it may, the primary purpose of these reserves is not to make individuals better off, certainly not at the moment, but to make industry more capable of competition in the world's markets.
The case for this new Clause is based on the need for reserves in our businesses, and not upon any selfish desire by shareholders or directors to have more for themselves, or for those whom they represent. It is a case of acute anxiety. Someone has said that there is plenty of money about, and that one can get plenty of capital if one wishes. It causes the greatest difficulty to small businesses to consider how they are going to finance themselves in the forthcoming year, which augurs so ill for industry.
It is not true to say that there is abundant money about, or that it can be obtained. The loss of confidence which has been spread through the financial policy of this Government, and of Mr. Truman's Government, the financial uncertainty and the approaching recession, make it extremely difficult to get capital. If they are going to take all the reward out of the lending of capital for risky or enterprising businesses they

are going to make it all the more difficult to get capital. The whole point of lending money on a risky venture is the hope of getting a high reward.
Hon. Members seem to forget that the developments of the past four years, of which they are so proud, are being financed by the risk-taking of our forefathers, by the accumulated wealth of previous generations, as well as by loans from the greatest capitalist state of all.
Rising prices, said the hon. Member for Ipswich (Mr. Stokes) made it easy to finance stocks. The hon. Member is wrong on both counts. First of all, rising prices do not make it easy to finance stocks, and secondly, prices are not rising. He also said that the present Government had done more to help industry than had any other Government. But almost everything which the Government have done has been an embarrassment and a handicap; and the greatest service the Government could render to industry would be to leave it alone and to allow the law of supply and demand to help us to get out of our troubles.

Mr. Eccles: I have listened to the speeches from hon. Members opposite and I wondered what the Chancellor of the Exchequer would say at this moment if he could have heard them. I assume that the Chancellor is not with us for reasons which we all understand, and that somewhere or other the right hon. and learned Gentleman is discussing the terrific strain upon the sterling exchange. The sort of speeches which we have had from the hon. and gallant Member for North Portsmouth (Major Bruce) and from the hon. Member for Edmonton (Mr. Albu) would have sounded lunatic at any meeting which was discussing the actual strain upon our pound. What does the hon. Member say? He asks whether we are prepared to say whether we want the capital investment programme enlarged or made smaller. Does the hon. Member know anything about what is happening? The whole question is whether the existing programme can be financed in any way for the next 12 months.
An hon. Member upon this side of the Committee mentioned that the hon. Member for Edmonton had something to do with industry. But if he had any remote connection with it does he not


know that even a mere whisper, for instance, of there being an Imperial Tobacco issue the other day caused indigestion on the market? Does he not know that it is impossible to underwrite even first-class issues in the City? Does he know anything about the state of the market?

Mr. Albu: How is it that this new Clause was put down as recently as this new situation arose?

Hon. Members: New situation?

Mr. Eccles: There we have an opinion from one who claims to be an economist, or someone of intelligence in the industrial world; an opinion that it is new to say that we are running into difficulties in meeting our balance of payments. What is happening? We have had a boom, with four years of almost full employment and that is the best thing for industry at any time; nobody is more ready to admit that than I. But, when one looks at the percentage of profits of industry taken by this Government in peacetime, then we find that it is greater than that taken by any other Government. We have managed to carry it because we have been in a boom situation; many industries have increased profit margins because they have had to bear such a heavy taxation and that, I submit, is bad for the country, and for the consumer.
What are we going to do now about our employment policy, and dealing with our problem of paying for our food and raw materials? When we discussed this in the time of the Coalition Government, it was said that it will not be possible quickly enough to detect the signs of a slump and take the necessary measures to stimulate industry in order that, before the thing gets out of hand, it can readjust itself and spend more on capital equipment and take up the slack. That is one of the things we always discussed. We said we should have to put back into industry more purchasing power in order that, in time, it might meet the trade recession. All the arguments about the level of profits over the last three years do not apply. What matters is how we get through the next 12 months.
It is a considerable proposition to put industry into the heart of getting on with re-equipment against the background of falling profits; and let nobody think that

profits will be the same over the next 12 months as in the past year. Government policy, if it wants a reduction in profits, must give some offset of this nature. This is the sort of thing which it is sensible to do, but owing to the principles and theories of the hon. Member for Edmonton and his hon. Friend, we are not to put into practice the sensible precautions for dealing with a trade recession; I, like my hon. Friends, say there may well be a recession. I am concerned to see that there is some wealth to distribute.
What is the question which the Chancellor is talking about now? He is concerned with the very serious trade and payments position with which we are faced, and I say that this Clause will help him. The people from whom we import are no longer willing to spend that sterling in this country, saying that our prices are too high. That is why we have meetings in Brussels, and Paris and everywhere else. People earning sterling here are not able to find the goods here in competition with other countries which they want, and no patching up the matter with the Americans will settle this problem. It goes very much deeper over the whole range of trade and payments problems. Now here is one of the things we might do.
12.15 a.m.
Here is one way which would stimulate industry and get its costs down. Hon. Members may say that they do not believe in the crisis and do not think we shall have a foreign exchange collapse. Next year they will have to take things far more drastically if they do that. I say that an intelligent House of Commons would start to anticipate the events which anyone can see—anyone, that is, who has knowledge of what is going on and can see what the Chancellor sees. It is time we stopped arguing at an academic level and took more interest in the real crisis before us.

Mr. Benn Levy: As I understand the hon. Gentleman's argument, it is that we have now reached a period of economic deflation and, therefore, it behoves us to increase purchasing power. Will he tell us why the only suggestion of hon. Members opposite for increasing purchasing power is to increase profits and not increase wages?

Mr. Eccles: It is fascinating to hear the hon. Gentleman ask something like that because it shows how far we are from reality. Here is a proposition which does not increase profits at all. It puts into the hands of a business more money out of the smaller profits it is going to make and allows it to keep a larger proportion at a moment when it is necessary to do all we can to keep capital investment going. We know by the difficulty of raising money that one cannot get money by the ordinary way. That is not increasing inflation at all, but making it possible to finance the capital investment programme which hon. Gentlemen opposite wish to see financed. Perhaps they will consider, when their chickens come home to roost, where the money is coming from to finance these things. If we do not take some steps in time I can assure them that they will have to take harder and more brutal steps before the Winter is here.

Mr. Spearman: I should like to refer to the speech of the hon. and gallant Member for North Portsmouth (Major Bruce) who attacked Lord Woolton. Does he not realise that in a condition of full employment we have to discriminate between the directions in which money can be spent on the capital programme? We have to think whether it is necessary to spend it on things that are going to produce more or of the effect of spending it on things that are not going to produce material results. If the Government are unable to devise a better plan, they had better fall back on the old-fashioned plan of raising interest rates.

Major Bruce: I did not say what I thought Lord Woolton said but I said what he did say. He said in October, 1947, that in these days of over-full employment there must be a drastic tightening of capital expenditure. If the hon. Member does not like those words and wants to alter them, as no doubt the Front Bench opposite would like to do, he had better get on with it.

Mr. Spearman: I would say that 1947 is not the same as 1949. I was more interested in the speech of the hon. Member for Ipswich (Mr. Stokes). It is interesting to know in which of his favourite occupations he is going to indulge. We do not know whether he is

going to attack the Conservative Party or his own Front Bench and we do not know until the end of his speech whether he has not attacked both. It seemed to me that the Financial Secretary was a little confused when he said that this Clause would bear hardly on Income Tax payers. What is the connection between a concession of this nature, where money is not going to be spent, and a concession in Income or Purchase Tax where it is going to be spent? I hope the Government will explain whether they are under that delusion? Quite obviously there are advantages in this Clause in that it would strengthen reserves of companies and enable them at the appropriate moment to improve their equipment. What is the objection if they spend it on capital expenditure? The Government have their own means of seeing that it is spent wisely, and if it is spent wisely it must have a beneficial effect on any inflationary tendency.

Mr. Glenvil Hall: But if this Clause is accepted, it will mean that my right hon. and learned Friend will get £58 million net less than he would otherwise receive. That means that he would have to get that amount from someone else, possibly the workers, possibly the Income Tax payers. If I could get that into the head of the hon. Gentleman I think we might get on.

Mr. Spearman: That is exactly the point which is so disturbing to large sections of the country which are not exactly opposed to the Socialist Party. A concession which costs £58 million but does not increase purchasing power does not matter at all. Far beter diminish the Budget surplus by that amount than by £1 million which would increase expenditure.

Mr. Glenvil Hall: The estimated Budget surplus for this year is only £14 million. I do not see how we can diminish £14 million by £58 million and still have a surplus.

Mr. Spearman: But the whole point is to sterilise purchasing power when demand is in excess of supply. If the right hon. Gentleman cannot realise that, I hope he will make it abundantly clear so that the Press can report it and the country as a whole can know how completely out of date the Government are in their views. We have all noted a


fall in Government stocks in the past few weeks. That could not possibly be caused by normal indigestion in the market. One reason why it may have been caused is that industrial companies are having to dispose at a great rate of their reserves because, owing to taxation methods, they cannot finance extensions out of profits, and therefore they have to use their reserves to replace their equipment which today is so much more expensive than it was before the war. If that is not the reason, I would remind the Financial

Secretary that it must be because there is a lack of confidence in the ability of the Government to preserve the economy of the country—a fact which is disturbing a great many people.

Mr. Whiteley: Mr. Whiteley rose in his place, and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 235; Noes, 111.

Division No. 190.]
AYES
[12.25 a.m.


Adams, Richard (Balham)
Ewart, R.
McGhee, H. G.


Albu, A. H.
Fairhurst, F.
McGovern, J.


Alexander, Rt. Hon. A. V.
Farthing, W. J.
Mack, J. D.


Allen, A. C. (Bosworth)
Fernyhough, E.
McKay, J. (Wallsend)


Attewell, H. C.
Fletcher, E. G. M. (Islington, E.)
Mackay, R. W. G. (Hull, N. W.)


Awbery, S. S.
Follick, M.
McKinlay, A. S.


Ayrton Gould, Mrs S.
Foot, M. M.
McLeavy, F.


Bacon, Miss A.
Forman, J. C.
Macpherson, T. (Romford)


Baird, J.
Fraser, T. (Hamilton)
Mallalieu, J. P. W. (Huddersfield)


Barton, C.
Freeman, J. (Watford)
Mann, Mrs. J.


Bechervaise, A. E.
Freeman, Peter (Newport)
Manning, C. (Camberwell, N.)


Berry, H.
Gaitskell, Rt. Hon. H. T. N.
Mellish, R. J.


Beswick, F.
Ganley, Mrs. C. S.
Middleton, Mrs. L.


Bing, G. H. C.
Gibson, C. W.
Millington, Wing-Comdr. E. R.


Binns, J.
Gilzean, A.
Mitchison, G. R.


Blackburn, A. H.
Glanville, J. E. (Consett)
Monslow, W.


Blenkinsop, A.
Gordon-Walker, P. C.
Morris, Lt.-Col. H. (Sheffield, C.)


Blyton, W. R.
Griffiths, D. (Rother Valley)
Morris, P. (Swansea, W.)


Braddock, Mrs. E. M. (L'pt. Exch'ge)
Guest, Dr. L. Haden
Nally, W.


Braddock, T. (Mitcham)
Gunter, R. J.
Neal, H. (Claycross)


Brook, D. (Halifax)
Guy, W. H.
Nichol, Mrs. M. E. (Bradford, N.)


Broughton, Dr. A. D. D.
Haire, John E. (Wycombe)
Nicholls, H. R. (Stratford)


Brown, George (Belper)
Hale, Leslie
Noel-Baker, Capt. F. E. (Brentford)


Brown, T. J. (Ince)
Hall, Rt. Hon. Glenvil
Noel-Baker, Rt. Hon. P. J. (Derby)


Bruce, Maj. D. W. T.
Hamilton, Lieut.-Col. R.
Oldfield, W. H.


Burden, T. W.
Hannan, W. (Maryhill)
Orbach, M.


Burke, W. A.
Haworth, J.
Paget, R. T.


Butler, H. W. (Hackney, S)
Henderson, Rt Hn. A. (Kingswinford)
Paling, Will T. (Dewsbury)


Callaghan, James
Henderson, Joseph (Ardwick)
Palmer, A. M. F.


Carmichael, James
Herbison, Miss M.
Pargiter, G. A.


Castle, Mrs. B. A.
Hewitson, Capt. M.
Parker, J.


Chamberlain, R. A.
Hobson, C. R.
Parkin, B. T.


Champion, A. J.
Holman, P.
Paton, J. (Norwich)


Chetwynd, G. R.
Holmes, H. E. (Hemsworth)
Pearson, A.


Cocks, F. S.
Horabin, T. L.
Peart, T. F.


Coldrick, W.
Houghton, A. L. N. D.
Popplewell, E.


Collins, V. J.
Hoy, J.
Porter, E. (Warrington)


Comyns, Dr. L.
Hubbard, T.
Porter, G. (Leeds)


Cook, T. F.
Hudson, J. H. (Ealing, W.)
Price, M. Philips


Corbet, Mrs. F. K. (Camb'well, N. W.)
Hughes, Emrys (S. Ayr)
Proctor, W. T.


Cove, W. G.
Hughes, Hector (Aberdeen, N.)
Pryde, D. J.


Crawley, A.
Hughes, H. D. (W'lverh'ton, W.)
Randall, H. E.


Crossman, R. H. S.
Hynd, H. (Hackney, C.)
Ranger, J.


Cullen, Mrs.
Hynd, J. B. (Attercliffe)
Rankin, J.


Daines, P.
Irving, W. J. (Tottenham, N.)
Reid, T. (Swindon)


Dalton, Rt. Hon. H.
Jay, D. P. T.
Rhodes, H.


Davies, Edward (Burslem)
Jeger, G. (Winchester)
Ridealgh, Mrs. M.


Davies, Ernest (Enfield)
Jones, D. T. (Hartlepool)
Robens, A.


Davies, Harold (Leek)
Jones, Elwyn (Plaistow)
Robinson, Kenneth (St. Pancras, N.)


Davies, Haydn (St. Pancras, S. W.)
Jones, J. H. (Bolton)
Rogers, G. H. R.


Deer, G.
Keenan, W.
Ross, William (Kilmarnock)


Delargy, H. J.
King, E. M.
Royle, C.


Diamond, J.
Kinley, J.
Sargood, R.


Dobbie, W.
Lang, G.
Segal, Dr. S.


Dodds, N. N.
Lavers, S.
Shackleton, E. A. A.


Driberg, T. E. N.
Lee, F. (Hulme)
Sharp, Granville


Dugdale, J. (W. Bromwich)
Leonard, W.
Shawcross, C. N. (Widnes)


Dye, S.
Levy, B. W.
Shurmer, P.


Ede, Rt. Hon. J. C.
Lindgren, G. S.
Silkin, Rt. Hon. L.


Edwards, W. J. (Whitechapel)
Logan, D. G.
Silverman, J. (Erdington)


Evans, Albert (Islington, W.)
Longden, F.
Silverman, S. S. (Nelson)


Evans, John (Ogmore)
Lyne, A. W.
Simmons, C. J.


Evans, S. N. (Wednesbury)
McAllister, G.
Skinnard, F. W.




Smith, C. (Colchester)
Tolley, L.
Wilkes, L.


Smith, S. H. (Hull, S. W.)
Tomlinson, Rt. Hon. G.
Wilkins, W. A.


Snow, J. W.
Ungoed-Thomas, L.
Willey, F. T. (Sunderland)


Sorensen, R. W.
Vernon, Maj. W. F.
Willey, O. G. (Cleveland)


Soskice, Rt. Hon. Sir Frank
Wallace, G. D. (Chislehurst)
Williams, J. L. (Kelvingrove)


Stokes, R. R.
Wallace, H. W. (Walthamstow, E.)
Williams, Ronald (Wigan)


Stross, Dr. B.
Warbey, W. N.
Williams, W. T. (Hammersmith, S.)


Stubbs, A. E.
Watkins, T. E.
Williams, W. R. (Heston)


Sylvester, G. O.
Webb, M. (Bradford, C.)
Willis, E.


Symonds, A. L.
Weitzman, D.
Wills, Mrs. E. A.


Taylor, R. J. (Morpeth)
Wells, P. L. (Faversham)
Woodburn, Rt. Hon. A.


Thomas, D. E. (Aberdare)
West, D. G.
Wyatt, W.


Thomas, George (Cardiff)
Wheatley, Rt. Hon. John (Edinb'gh, E.)
Yates, V. F.


Thomas, I. O. (Wrekin)
Whiteley, Rt. Hon. W.
Younger, Hon. Kenneth


Thomas, John R. (Dover)
Wigg, George
TELLERS FOR THE AYES:


Timmons, J.
Wilcock, Group-Capt. C. A. B.
Mr. Collindridge and Mr. Bowden.




NOES


Amory, D. Heathcoat
Gates, Maj. E. E.
Odey, G. W.


Assheton, Rt. Hon. R.
George, Lady M. Lloyd (Anglesey)
Peto, Brig. C. H. M.


Astor, Hon. M.
Gomme-Duncan, Col. A.
Pickthorn, K.


Baldwin, A. E.
Grimston, R. V.
Poole, O. B. S. (Oswestry)


Beamish, Maj. T. V. H.
Harden, J. R. E.
Prior-Palmer, Brig. O.


Birch, Nigel
Hare, Hon. J. H. (Woodbridge)
Raikes, H. V.


Boles, Lt.-Col. D. C. (Wells)
Harris, F. W. (Croydon, N.)
Rayner, Brig. R.


Bowen, R.
Haughton, S. G.
Renton, D.


Bower, N.
Henderson, John (Cathcart)
Roberts, Emrys (Merioneth)


Boyd-Carpenter, J. A.
Hinchingbrooke, Viscount
Roberts, H. (Handsworth)


Bracken, Rt. Hon. Brendan
Hollis, M. C.
Roberts, W. (Cumberland, N.)


Braithwaite, Lt.-Comdr. J. G.
Howard, Hon. A.
Robinson, Roland (Blackpool, S.)


Buchan-Hepburn, P. G. T.
Hudson, Rt. Hon. R. S. (Southport)
Ropner, Col. L.


Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)
Hurd, A.
Ross, Sir R. D. (Londonderry)


Carson, E.
Hutchison, Lt.-Cm. Clark (E'b'rgh W.)
Scott, Lord W.


Challen, C.
Hutchison, Col. J. R. (Glasgow, C.)
Shephard, S. (Newark)


Channon, H.
Keeling, E. H.
Spearman, A. C. M.


Clarke, Col. R. S.
Langford-Holt, J.
Stanley, Rt. Hon. O.


Conant, Maj. R. J. E.
Legge-Bourke, Maj. E. A. H.
Strauss, Henry (English Universities)


Corbett, Lieut.-Col. U. (Ludlow)
Linstead, H. N.
Stuart, Rt. Hon. J. (Moray)


Crookshank, Capt. Rt. Hon. H. F. C.
Lloyd, Selwyn (Wirral)
Taylor, C. S. (Eastbourne)


Crosthwaite-Eyre, Col. O. E.
Low, A. R. W.
Teeling, William


Crowder, Capt. John E.
Lucas, Major Sir J.
Thomas, J. P. L. (Hereford)


Cuthbert, W. N.
Lucas-Tooth, Sir H.
Thorneycroft, G. E. P. (Monmouth)


Davies, Rt. Hn. Clement (Montgomery)
McCorquodale, Rt. Hon. M. S.
Thornton-Kemsley, C. N.


Dodds-Parker, A. D.
McFarlane, C. S.
Thorp, Brigadier R. A. F.


Drewe, C.
Mackeson, Brig. H. R.
Turton, R. H.


Dugdale, Maj. Sir T. (Richmond)
Macmillan, Rt. Hn. Harold (Bromley)
Vane, W. M. F.


Eccles, D. M.
Macpherson, N. (Dumfries)
Wadsworth, G.


Eden, Rt. Hon. A.
Maitland, Comdr. J. W.
Wakefield, Sir W. W.


Erroll, F. J.
Marples, A. E.
Walker-Smith, D.


Foster, J. G. (Northwich)
Maude, J. C.
Ward, Hon. G. R.


Fraser, H. C. P. (Stone)
Mellor, Sir J.
Wheatley, Colonel M. J. (Dorset, E.)


Fraser, Sir I. (Lonsdale)
Mott-Radclyffe, C. E.
Williams, C. (Torquay)


Fyfe, Rt. Hon. Sir D. P. M.
Neven-Spence, Sir B.
York, C.


Gage, C.
Nicholson, G.



Galbraith, Cmdr. T. D. (Pollok)
Noble, Comdr. A. H. P.
TELLERS FOR THE NOES:


Galbraith, T. G. D. (Hillhead)
Nutting, Anthony
Commander Agnew and Mr. Digby.

Question put accordingly, "That the Clause be read a Second time."

The Committee divided: Ayes, 110; Noes, 235.

Division No. 191.]
AYES
[12.35 a.m.


Agnew, Cmdr. P. G.
Corbett, Lieut.-Col. U. (Ludlow)
Gates, Maj. E. E.


Amory, D. Heathcoat
Crookshank, Capt. Rt. Hon. H. F. C.
George, Lady M. Lloyd (Anglesey)


Assheton, Rt. Hon. R.
Crosthwaite-Eyre, Col. O. E.
Gomme-Duncan, Col. A.


Astor, Hon. M.
Crowder, Capt. John E.
Grimston, R. V.


Baldwin, A. E.
Cuthbert, W. N.
Harden, J. R. E.


Beamish, Maj. T. V. H.
Digby, Simon Wingfield
Hare, Hon. J. H. (Woodbridge)


Birch, Nigel
Dodds-Parker, A. D.
Harris, F. W. (Croydon, N.)


Boles, Lt.-Col. D. C. (Wells)
Drewe, C.
Haughton, S. G.


Bowen, R.
Dugdale, Maj. Sir T. (Richmond)
Henderson, John (Cathcart)


Bower, N.
Eccles, D. M.
Hinchingbrooke, Viscount


Boyd-Carpenter, J. A.
Eden, Rt. Hon. A.
Hollis, M. C.


Bracken, Rt. Hon. Brendan
Erroll, F. J.
Howard, Hon. A.


Braithwaite, Lt.-Comdr. J. G.
Foster, J. G. (Northwich)
Hudson, Rt. Hon. R. S. (Southport)


Buchan-Hepburn, P. G. T.
Fraser, H. C. P. (Stone)
Hurd, A.


Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)
Fraser, Sir I. (Lonsdale)
Hutchison, Lt.-Cm. Clark (E'b'rgh W.)


Carson, E.
Fyfe, Rt. Hon. Sir D. P. M.
Hutchison, Col. J. R. (Glasgow, C.)


Challen, C.
Gage, C.
Keeling, E. H.


Channon, H.
Galbraith, Cmdr. T. D. (Pollok)
Langford-Holt, J.


Clarke, Col. R. S.
Galbraith, T. G. D. (Hillhead)
Legge-Bourke, Maj. E. A. H.




Linstead, H. N.
Peto, Brig. C. H. M.
Taylor, C. S. (Eastbourne)


Lloyd, Selwyn (Wirral)
Pickthorn, K.
Teeling, William


Low, A. R. W.
Poole, O. B. S. (Oswestry)
Thomas, J. P. L. (Hereford)


Lucas, Major Sir J.
Prior-Palmer, Brig. O.
Thorneycroft, G. E. P. (Monmouth)


Lucas-Tooth, Sir H.
Raikes, H. V.
Thornton-Kemsley, C. N.


McCorquodale, Rt. Hon. M. S.
Rayner, Brig. R.
Thorp, Brigadier R. A. F.


McFarlane, C. S.
Renton, D.
Turton, R. H.


Macmillan, Rt. Hn. Harold (Bromley)
Roberts, Emrys (Merioneth)
Vane, W. M. F.


Macpherson, N. (Dumfries)
Roberts, H. (Handsworth)
Wadsworth, G.


Maitland, Comdr. J. W.
Roberts, W. (Cumberland, N.)
Wakefield, Sir W. W.


Marples, A. E.
Robinson, Roland (Blackpool, S.)
Walker-Smith, D.


Maude, J. C.
Ropner, Col. L.
Ward, Hon. G. R.


Mellor, Sir J.
Ross, Sir R. D. (Londonderry)
Wheatley, Colonel M. J. (Dorset, E.)


Mott-Radclyffe, C. E.
Scott, Lord W.
Williams, C. (Torquay)


Neven-Spence, Sir B.
Shephard, S. (Newark)
York, C.


Nicholson, G.
Spearman, A. C. M.



Noble, Comdr. A. H. P.
Stanley, Rt. Hon. O.
TELLERS FOR THE AYES:


Nutting, Anthony
Strauss, Henry (English Universities)
Major Conant and Brigadier Mackeson


Odey, G. W.
Stuart, Rt. Hon. J. (Moray)





NOES


Adams, Richard (Balham)
Ewart, R.
Lyne, A. W.


Albu, A. H.
Fairhurst, F.
McAllister, G.


Alexander, Rt. Hon. A. V.
Farthing, W. J.
McGhee, H. G.


Allen, A. C. (Bosworth)
Fernyhough, E.
McGovern, J.


Attewell, H. C.
Fletcher, E. G. M. (Islington, E.)
Mack, J. D.


Awbery, S. S.
Follick, M.
McKay, J. (Wallsend)


Bacon, Miss A.
Foot, M. M.
Mackay, R. W. G. (Hull, N. W.)


Baird, J.
Forman, J. C.
McKinlay, A. S.


Barton, C.
Fraser, T. (Hamilton)
McLeavy, F.


Bechervaise, A. E.
Freeman, J. (Watford)
Macpherson, T. (Romford)


Berry, H.
Freeman, Peter (Newport)
Mallalieu, J. P. W. (Huddersfield)


Beswick, F.
Gaitskell, Rt. Hon. H. T. N.
Mann, Mrs. J.


Bing, G. H. C.
Ganley, Mrs. C. S.
Manning, C. (Camberwell, N.)


Binns, J.
Gibson, C. W.
Mellish, R. J.


Blackburn, A. R.
Gitzean, A.
Middleton, Mrs. L.


Blenkinsop, A.
Glanville, J. E. (Consett)
Millington, Wing-Comdr. E. R.


Blyton, W. R.
Gordon-Walker, P. C.
Mitchison, G. R.


Braddock, Mrs. E. M. (L'pl. Exch'ge)
Griffiths, D. (Rother Valley)
Monslow, W.


Braddock, T. (Mitcham)
Guest, Dr. L. Haden
Morris, Lt.-Col. H. (Sheffield, C.)


Brook, D. (Halifax)
Gunter, R. J.
Morris, P. (Swansea, W.)


Broughton, Dr. A. D. D.
Guy, W. H.
Nally, W.


Brown, George (Belper)
Haire, John E. (Wycombe)
Neal, H. (Claycross)


Brown, T. J. (Ince)
Hale, Leslie
Nichol, Mrs. M. E. (Bradford, N.)


Bruce, Maj. D. W. T.
Hall, Rt. Hon. Glenvil
Nicholls, H. R. (Stratford)


Burden, T. W.
Hamilton, Lieut.-Col. R.
Noel-Baker, Capt. F. E. (Brentford)


Burke, W. A.
Hannan, W. (Maryhill)
Noel-Baker, Rt. Hon. P. J. (Derby)


Butler, H. W. (Hackney, S.)
Haworth, J.
Oldfield, W. H.


Callaghan, James
Henderson, Rt Hn. A. (Kingswinford)
Orbach, M.


Carmichael, James
Henderson, Joseph (Ardwick)
Paget, R. T.


Castle, Mrs. B. A.
Herbison, Miss M.
Paling, Will T. (Dewsbury)


Chamberlain, R. A.
Hewitson, Capt M.
Palmer, A. M. F.


Champion, A. J.
Hobson, C. R.
Pargiter, G. A.


Chetwynd, G. R.
Holman, P.
Parker, J.


Cocks, F. S.
Holmes, H. E. (Hemsworth)
Parkin, B. T.


Coldrick, W.
Horabin, T. L.
Paton, J. (Norwich)


Collins, V. J.
Houghton, A. L. N. D.
Pearson, A.


Comyns, Dr. L.
Hoy, J.
Peart, T. F.


Cook, T. F.
Hubbard, T.
Popplewell, E.


Corbet, Mrs. F. K. (Camb'well, N. W.)
Hudson, J. H. (Ealing, W.)
Porter, E. (Warrington)


Cove, W. G.
Hughes, Emrys (S. Ayr)
Porter, G. (Leeds)


Crawley, A.
Hughes, Hector (Aberdeen, N.)
Price, M. Philips


Crossman, R. H. S.
Hughes, H. D. (W'lverh'ton, W.)
Proctor, W. T.


Cullen, Mrs.
Hynd, H. (Hackney, C.)
Pryde, D. J.


Daines, P.
Hynd, J. B. (Attercliffe)
Randall, H. E.


Dalton, Rt. Hon H.
Irving, W. J. (Tottenham, N.)
Ranger, J.


Davies, Edward (Burslem)
Jay, D. P. T.
Rankin, J.


Davies, Ernest (Enfield)
Jeger, G. (Winchester)
Reid, T. (Swindon)


Davies, Harold (Leek)
Jones, D. T. (Hartlepool)
Rhodes, H.


Davies, Haydn (St. Pancras, S. W.)
Jones, Elwyn (Plaistow)
Ridealgh, Mrs. M.


Deer, G.
Jones, J. H. (Bolton)
Robens, A.


Delargy, H. J.
Keenan, W.
Robinson, Kenneth (St. Pancras, N.)


Diamond, J.
King, E. M.
Rogers, G. H. R.


Dobbie, W.
Kinley, J.
Ross, William (Kilmarnock)


Dodds, N. N.
Lang, G.
Royle, C.


Driberg, T. E. N.
Lavers, S.
Sargoed, R.


Dugdale, J. (W. Bromwich)
Lee, F. (Hulme)
Segal, Dr. S.


Dye, S.
Lee, Miss J. (Cannock)
Shackleton, E. A. A.


Ede, Rt. Hon. J. C.
Leonard, W.
Sharp, Granville


Edwards, W. J. (Whitechapel)
Levy, B. W.
Shawcross, C. N. (Widnes)


Evans, Albert (Islington, W.)
Lindgren, G. S.
Shurmer, P.


Evans, John (Ogmore)
Logan, D. G.
Silkin, Rt. Hon L.


Evans, S. N. (Wednesbury)
Longden, F.
Silverman, J. (Erdington)







Silverman, S. S. (Nelson)
Thomas, John R. (Dover)
Wilcock, Group-Capt. C. A. B.


Simmons, C. J.
Timmons, J.
Wilkes, L.


Skinnard, F. W.
Tolley, L.
Wilkins, W. A.


Smith, C. (Colchester)
Tomlinson, Rt. Hon. G.
Willey, F. T. (Sunderland)


Smith, S. H. (Hull, S. W.)
Ungoed-Thomas, L.
Willey, O. G. (Cleveland)


Snow, J. W.
Vernon, Maj. W. F.
Williams, J. L. (Kelvingrove)


Sorensen, R. W.
Wallace, G. D. (Chislehurst)
Williams, Ronald (Wigan)


Soskice, Rt. Hon. Sir Frank
Wallace, H. W. (Walthamstow, E.)
Williams, W. T. (Hammersmith, S.)


Stokes, R. R.
Warbey, W. N.
Williams, W. R. (Heston)


Stross, Dr. B.
Watkins, T. E.
Willis, E.


Stubbs, A. E.
Webb, M. (Bradford, C.)
Wills, Mrs. E. A.


Sylvester, G. O.
Weitzman, D.
Woodburn, Rt. Hon. A.


Symonds, A. L.
Wells, P. L. (Faversham)
Wyatt, W.


Taylor, R. J. (Morpeth)
West, D. G.
Yates, V. F.


Thomas, D. E. (Aberdare)
Wheatley, Rt. Hon. John (Edinb'gh, E.)
Younger, Hon. Kenneth


Thomas, George (Cardiff)
Whiteley, Rt. Hon. W.
TELLERS FOR THE NOES:


Thomas, I. O. (Wrekin)
Wigg, George
Mr. Collindridge and Mr. Bowden.

Mr. Stanley: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
I say at once that I am not doing this for the ordinary reason. It is customary at this time of night on one of these late Sittings to move this Motion in order to ascertain from the Government what their intentions are with regard to the progress of the Bill. We know that they desire to reach the conclusion of the Bill, and although it would have been very much for the convenience of the whole Committee if at an earlier stage the Leader of the House had agreed to a proposition which I made that we should have an extra half day, which would probably have avoided a great deal of the inconvenience which we are suffering, he refused it, and we accept the position that the Bill has to be finished tonight.
12.45 a.m.
My purpose in rising is quite a different one. It is to explain to the Committee, and particularly to hon. Members opposite, a dilemma and a difficulty, a difficulty in which I am going to appeal to them for their help. Those who were present in the Committee last night will have heard a remarkable speech by the Financial Secretary to the Treasury in which he laid down on behalf of the Government a definite new policy with regard to the Sittings of the House. He laid down the policy that either in future the House would rise by 12.30 a.m.—before the trains ceased to run—or if we were unable to do that, to sit on until 5.30 or 6 a.m.—until the trains began to run again. That was apparently to be quite independently of any business the House had to discuss, and it was to depend entirely on the question of transport. We accept that—we have gone past 12.30 a.m. and now we have got to sit until 5.30 or 6 a.m.
I have been through the business which remains, and I must tell hon. Members that as far as we are concerned we do not feel it is possible to meet the Government's wishes and keep the business going until 6 a.m. We shall certainly do our best, but I warn the Patronage Secretary that I have considered it carefully, and I do not think we shall be able to accomplish that which he desires. Therefore, I appeal to hon. Gentlemen opposite to help us. If they are prepared to take their share, to play their part, then I think we can hope to meet the new wishes of the Government. We have not had very much help from them so far. It was a little bit better on the last Clause, but if I may say so, not quite good enough. There are too many signs of one or two odd people being told by the Patronage Secretary to get up and speak, even if they have nothing to speak about. I do not think that that, even with our assistance, will be enough to meet the Patronage Secretary's point. There is the dilemma. We shall do our part, but I sincerely assure the Committee that by ourselves we do not think we can succeed, and therefore whether or not the Government's wishes are to be met must depend to a large extent on the action of their own supporters.

The Secretary of State for the Home Department (Mr. Ede): Never was a retreat more skilfully masked than in the speech to which we have just listened. For last night, a little earlier than this, the right hon. Gentleman assured us that having gone through the Order Paper he had reached the conclusion that if we sat until about 3.30 a.m. last night and tonight we could reach the end of the business. We rose without doing any more last night, and therefore on that calculation we should last through until 7 o'clock this morning. He has found


that he has made a miscalculation. The statement made by the Financial Secretary last night was nothing new, for I recollect making it as long ago as 1923 when I occupied the seat at the moment occupied by the hon. Member for Torquay (Mr. C. Williams). I have always thought it was an exceedingly foolish thing for hon. Members to be put to the maximum of inconvenience in order to do the minimum of work, and that is precisely what happens when we go on to 3.30 a.m., which was the time selected by the right hon. Gentleman in the speech he made last night. I am quite sure it will be a matter of regret that this miscalculation should have been made by the right hon. Gentleman.
We had better continue the sitting and do the best we can. At any rate this can safely be said, seven assuming we do not sit until 6 or 7 o'clock, it will be better to have had one night in bed than to have had two nights sitting until 3.30, because two successive nights on that basis always seemed to me about the worst possible strain on Parliamentary tempers and to result in the least business being done. Having listened to the Debate for some considerable time, I should not so easily have despaired of my supporters, had I been sitting in the right hon. Gentleman's place, as he appears to have done. In the elegant language used by the noble lord last night, it would appear that they are beginning to lack Parliamentary guts. The right hon. Gentleman and his friends will no doubt do their best. I do not advise my hon. Friends to help them, because I do not share the late Mr. Ramsay MacDonald's passion for a Council of State. The best thing to do is to conduct the Debate in the usual way and see how well we get on. [Interruption.] I do not know what the objection is.

Mr. J. Stuart: The late Mr. Ramsay MacDonald was my constituent. I cannot understand what the right hon. Gentleman thinks he is doing by throwing mud at him tonight.

Mr. Ede: For an ex-Chief Whip to call the allusion I made to Mr. Ramsay MacDonald "throwing mud" shows a quite new definition of Parliamentary controversy.

Hon. Members: You ran away from him.

Mr. Ede: We did not run away from him, he ran away from us. I suggest we should now proceed with the business and see how we get on and see how much better a judge of Parliamentary business the right hon. Gentleman is tonight than he was last night.

Mr. Sydney Silverman: I do not want to be misunderstood about this. I am not responding to the right hon. Gentleman's appeal. I think it worth while to intervene to say two things. I heard what the right hon. Gentleman said, and it appears he has considerable difficulty now in using the time which he insisted on having. If that is so, it becomes a little difficult to understand why, in the speech he has just made, he repeated his demand for a still further half-day.

Mr. Stanley: The hon. Gentleman must not carry misrepresentation to unaccustomed limits. What I said when I raised the question last week was that if we had had an extra half-day given it would have obviated the late sittings we have had.

Mr. Silverman: The right hon. Gentleman has proved me right, because he and his supporters have just proved that they cannot use the time they have got. The only other thing I want to say is that I had a rather different understanding of what occurred last night. I thought that there had been some kind of understanding to stop about midnight, and that the right hon. Gentleman's supporters wished that to happen, but nevertheless wished to deprive hon. Members on this side of the benefit of it, and so pursued a perfectly idle discussion for 40 minutes to see that nobody benefited by the early hour.

Mr. Stanley: I must intervene at once to tell the hon. Member that, as usual, he is completely wrong. He has no justification, and the Patronage Secretary will bear me out, for saying that there was any agreement to stop at 12 o'clock last night. I hope that the hon. Member who has now accused me of breaking an agreement, will, with the authority of the Patronage Secretary, withdraw that remark.

Mr. Silverman: I have not accused the right hon. Gentleman of either


making an agreement or breaking an agreement. I know what I said, but let me say at once that if that I was accusing the right hon. Gentleman of breaking an agreement he had made, I withdraw that at once, because I had no intention of giving such an impression. What I did say was, that hon. Members behind the right hon. Gentleman pursued, consciously and deliberately, a course which had that purpose.

Mr. J. Langford-Holt: The hon. Member and the Home Secretary carried out a game with my right hon. Friend by accusing him of miscalculating, by some hours, how long the Sitting would last. I think that what they failed to realise was that several Closures have been moved on the discussion this evening, and, as far as I know, none of these Closure Motions has been moved from the Opposition front bench. Perhaps they will be good enough, in future, to take that into consideration if they attempt, which I doubt they will do, to make a fair statement.

Mr. Stanley: I have made my point. I thought I would have an immediate response. But we shall have to see what happens, and I only moved this Motion to be able to raise that point. Having moved the Motion, I beg to ask leave to withdraw it.

Motion, by leave, withdrawn.

New Clause.—(CARRY BACK OF LOSSES FOR INCOME TAX.)

Section thirty-four of the Income Tax Act, 1918, shall be amended by the addition to subsection (1) of the following words:
Provided that if the aggregate amount of his income for the year of assessment is less than the amount of his loss the excess of loss may be carried back to the year preceding the year of assessment and such adjustment of his liability for that preceding year shall be made as if the excess of the loss were a loss sustained in the preceding year, and if the aggregate income of the preceding year is less than the excess of the loss so carried back the balance of the loss may be carried back and deducted from his aggregate income of the next but one year preceding the year of assessment and so on to such further preceding years up to a maximum of six years preceding the year of assessment as may be required to assure that the loss has been deducted from his aggregate income for those seven years."—[Colonel Hutchison.]

Brought up, and read the First time.

Colonel J. R. H. Hutchison: I beg to move, "That the Clause be read a Second time."
After the interlude to which we have just listened, it is clear that I can hope for very little help with this Clause on either of the two counts which my right hon. Friend put before the Committee, because it is clear to us that instructions have been left with the Treasury Bench that whatever the validity of our argument, without considering what our case may be, there shall be no concession. We have also seen examples of the Closure on insufficient discussions on proposals and measures we put forward. The Home Secretary and the hon. Member who followed the right hon. Gentleman also showed that they are still going to be obdurate in not even really discussing matters put forward.

Mr. Leslie Hale: On a point of Order. Is the hon. and gallant Member in Order in referring to the Closure on insufficient discussion?

The Deputy-Chairman: That is a matter of opinion, and I do not think it is a reflection upon the Chair. I think that the Patronage Secretary was probably being criticised, and not the Chair.

Mr. S. Silverman: Further to that point of Order. I always thought that while the responsibility of moving the Motion might rest with the right hon. Gentleman who moves it, the responsibility for accepting or rejecting that Motion rests with the Chair. Therefore, is not any statement that the Closure was applied on insufficient discussion a reflection upon the Chair?

The Deputy-Chairman: I do not think that is so. I think the Closure was properly moved, and the hon. Member may disagree with me. I do not think that is a reflection upon the Chair. Any hon. Member may think that a discussion should go on for two or three hours. I do not think that is a reflection upon the Chair.

1.0 a.m.

Mr. C. Williams: As the hon. Member for Nelson and Colne (Mr. S. Silverman) has been here long enough to have heard a good many people, and probably he himself, blame the Government for the


use—the brutal use—of the Closure, would he, so far as his continual points of Order are concerned, pay attention to what he himself has probably done?

Colonel Hutchison: We were told the other day, more jokingly I thought than seriously, that the Government was a partner in industry. Well, no sleeping partner can ever have slept more soundly, because, when profits are made, the Government take their share, but when losses appear the Government return very little to those who have previously made the profits. The position of the taxation law at present is that, where a concern has been making profits in the recent past and then runs into a loss, it is entitled to set that loss against only one year's back profits. It is true that if there is an excess of loss after it has set off the loss against the one year's profit, it can carry this on to the future, but we contend that it is not right that the State, with taxes as high as they are at present, should tax profits and not, on an equal basis—or an approximately equal basis—allow losses.
At the present time, and for a number of years past, concerns have paid taxation on what are not really profits at all. They are items shown in the balance sheet as a fictitious form of profit because of constantly rising prices of the commodities and materials they handle and the stock which they carry. So they have paid to the Treasury for a large number of years large sums of money on figures shown in balance sheets which are not true profits at all. The Government are therefore really piling up a large reserve of money which is, in effect, accruing from taxation on capital. The situation at present is changing ominously, and one of the tragedies for those of us concerned with industry—and I am speaking not only for management but for all sides, for worker as well as for employer and director—has been to have to hear the type of economics spoken by those whom I can only describe as "economic adventurers".
The sort of talk to which we have listened this evening is going to act as a veritable disaster to those whom, the Government are always telling us, they want to benefit—the workers. It will be a veritable disaster if the views to which I refer continue to be held. We are, un-

doubtedly, running into a period of loss; not, perhaps, for all concerned; but those firms who have enjoyed "fictitious" profits for the last few years, will struggle with a load into the threatening future which they will not, for a very long time, be able to discharge. It may submerge them completely. If the Government, who always say they have at heart the well-being of industry, wish to help industry, both large and small, to meet an ever darkening future, they will have to accept this proposed new Clause.

Mr. Hale: There are one or two very short points I should like to raise. I believe we have 22 hours and 55 minutes of the day left to us so that the matters which remain can be very thoroughly and amicably discussed. I do not know whether the hon. and gallant Gentleman really wanted his Clause to be accepted or if he was only trying to score off the Government. Out of 10 minutes of his speech he spent six minutes crying stinking fish. He talked about the depression which was coming with every appearance of joy, and about the ever-darkening atmosphere. It is hardly necessary to say that the proposal is utterly impracticable. The suggestion that one could ante-date claims for loss in a time of high taxation when one can look forward to a period of reduction in taxation—[Interruption]. If the hon. and gallant Member wants to cry more stinking fish, I will let him. I speak as a optimist. I say that this Government is the best Government the country has ever had. I see the town I represent more prosperous than it has ever been, and if it were not for the habit of some hon. Members opposite going round the world and criticising their country and crying it down, we should be in a better position still.

Mr. Michael Astor: Hon. Members who go abroad are extremely careful. The hon. Member should not fling these accusations about without giving names.

Mr. Hale: Quotations have frequently been cited, but as the hon. Member previously interrupted me on a matter of deportment, I would point out that he has addressed the Committee not only with his hand in a pocket, which is against the rules of the Committee and a breach of taste, but further with his hand in his own pocket, which is a breach of the


rules of his party. Each hon. Member opposite knows something about some subjects particularly, and the hon. Member's speciality is deportment—an accomplishment he shares with the late Mr. Turveydrop.
This proposal is impracticable, and it would put a great strain on the Income Tax officials. It would bring about a position in which mathematically an apparent loss could be made to pay. Hon. Members opposite have evolved a new terminology in which high profits are always referred to as fictitious and losses as real. Everyone knows that there has to be a fictitious loss and that there may be a time when it is convenient to buy goods and charge them up to a year which has not been too prosperous. If this proposal were carried it would mean an increase in that practice.
I want to call attention to a matter of some importance because after all this discussion it is time that someone did. There was a very interesting correspondence in "The Times" which arises by inference on this suggestion. There are many people with what are largely fluctuating income in these times. In the theatrical profession, sport, and most of the arts and sciences, there are many people who do not know from year to year what their income will be, but who find that it varies very substantially. One year they may be making £5,000 to £6,000 a year, and another year only £500. I shall speak a little louder to overcome the cackling from the benches opposite which is more appropriate to a smoking room.

Mr. Stanley: We do find it a little difficult but it is not so much that the hon. Member does not speak loudly enough but that he speaks very fast and it is not always easy, unless one is directly near him, to know always what he is saying.

Mr. Hale: I am grateful to the right hon. Gentleman. He is, of course, pursuing his previous point of the necessity of spreading out our deliberations a little longer and therefore inviting me to talk a little slower. I shall try to be slower because I am trying to put quite seriously an important point. There are many professions in which fluctuating incomes do make a very real hardship upon the taxpayer. Frequently a man is called upon

to pay Surtax in a year when he has had very little income. The suggestion is made that the author is the classic example. Dramatists and artists are also called upon to face a very real burden in this respect.
This Clause does not wholly face up to that situation. It endeavours to meet one particular type of it in a way which is quite impracticable and impossible. There was a way in which this fluctuation was dealt with. In the years which followed the Great War there was a three years' average, and persons belonging to certain professions could take advantage of that average and escape the very real hardship which often occurs, particularly in a small office where the whole prosperity is often dependent upon whether one or two cheques come in today or two or three days later.
I ask the Government to reconsider this matter and see how far it would be practicable to reintroduce a proposal of that kind which is based completely upon equity. It is perfectly fair that if you have a fluctuating income you should be able to spread it over a period and pay tax on average income. I am sorry to have to say this, but that privilege was rather wantonly withdrawn in 1925 by the then Chancellor of the Exchequer, the right hon. Member for Woodford (Mr. Churchill). However, we can still put right the mistakes of the past, and I think there is a case for this. I propose to try and put down on the Report stage, a Clause to meet this particular grievance and I give the Government due warning in the hope that they will consider it favourably in the interim.

Colonel Haughton: I am glad that the hon. Member for Oldham (Mr. Hale) came back in the last part of his speech to the object of this Clause. I first understood from what he said that he was going to oppose it, but he has given it a very great measure of support. Behind it there are two things which will appeal to every member of the Committee. The first is the knowledge that in almost every industrial concern—and also in the many cases that the hon. Member for Oldham has quoted—there are years in which, through no fault of their own, there are very serious losses. That is the first point which I suggest will be accepted as


commonplace by every Member of the Committee.
The second is that every Member would be wishful to help an honourable company back on to its feet again, and that is really the object of this new Clause. What it seeks to do is really quite simple. The hon. Member for Oldham said that it would be quite impracticable, but I do not think we should accept that until we have heard what the Economic Secretary, or whoever is answering this case, says. The proposal is quite simple. A company makes a very severe loss in a particular year. That loss is more than it can pay out and it is carried forward on the assumption that the next year it will make sufficient profit to take up that deficit. This Clause seeks not to go forward but to spread backwards, and no matter what the hon. Member for Oldham may say, there are such things as reclaims of Income Tax. I am glad to hear him say that he is going to apply his brain to this matter between now and the Report stage. I look forward to seeing the new Clause when drafted.

1.15 a.m.

The Solicitor-General: The proposed Clause raises the simple question of whether provision should be made in tax legislation for writing losses backward—whether, in other words, there should be one more method of obtaining relief in respect of losses in addition to the three methods provided. Before I address myself to that point, I should like to acknowledge the intimation which my hon. Friend the Member for Oldham (Mr. Hale) has given that he proposes to put down a new Clause. When it is put down it will be studied with great interest by those responsible for making a decision.
There are three ways in which a trader can treat a loss which he makes. He can write it off against his aggregate income in the year in which he makes the loss; he can write it off against profits in that year made by any other business which he might conduct; or he can write it off against future profits which he makes in the six succeeding years. One starts with the position that there are already ample methods to enable him to obtain relief in respect of a bad year's trading. That is a reason which makes it doubtful

whether any further method need be provided.
The method suggested in the new Clause of writing off backward would be almost impossible to implement. I shall give a reason. Supposing that in past years a company has paid dividends and that some shareholders in the company are entitled to relief because their total incomes entitled them to some repayment of tax. If the suggested method of treating losses were adopted, it would mean that the Revenue, having given relief to those shareholders, would be under the obligation of trying to get it back—otherwise the Revenue would lose. Administratively, that system would be completely impossible. Apart from that, if losses were written back it would place the Revenue in the difficult position that it would never know what is the national revenue because it may have to give some back. These are the reasons which make such a scheme administratively difficult and undesirable in principle.
I would remind the Committee that there is a committee, to which reference has on many occasions been made, about to investigate all these matters. If there is need for a further method of treating losses, that is the sort of problem with which the committee should concern itself. For the reasons that there are ample opportunities for traders to write off losses, that the new method would be administratively difficult to operate, and undesirable in principle for the reasons I have given—and there are others—and because the whole problem is to be investigated, I believe that the Committee will agree that this new Clause should not be adopted.

Mr. O. Poole: It is difficult to see exactly what right the Solicitor-General had to encourage the hon. Member for Oldham (Mr. Hale) to believe that the Clause he is going to put down is likely to receive favourable consideration.

The Solicitor-General: I said nothing of the sort. I said that it would be carefully studied—as are all Clauses put down on the Order Paper.

Mr. Poole: I agree with the point made by the hon. Member for Oldham, but it seems that the remarks of the Solicitor-General preclude the possibility that any Clause covering, that point


will be accepted by the Government. The point that the hon. Member for Oldham made is that a man is liable to pay tax and because of large losses incurred in the current year has not the funds to meet the tax liability, and that that puts the individual or the firm in an extremely embarassing position. I was sorry, if I may say so, that the hon. Member for Oldham should have started his remarks in the way he did because we on this side of the Committee always listen extremely carefully to him, because it is difficult to catch what he says, and also because in fact what he generally says is extremely sensible. It is a great pity if the point he put forward is not considered in due course when his Clause is put down. The remarks of the Solicitor-General would seem to mean that the possibility of any Clause in this form would be precluded from receiving favourable consideration.

Question put, and negatived.

New Clause.—(PROFITS TAX: WHOLETIME WORKING DIRECTOR.)

Sub-paragraph (c) of paragraph 13 of the Fourth Schedule to the Finance Act, 1937, as amended by paragraph 2 of Part III of the Eighth Schedule to the Finance Act, 1947 (which defines the expression "whole time service director" for the purpose of the Profits Tax) shall be amended by the omission of the words "five per cent." and the insertion of the words "ten per cent."—[Colonel Haughton.]

Brought up and read the First time.

Colonel Haughton: I beg to move, "That the Clause be read a Second time."
The new Clause deals with the case of a man who works his way up and finds his place on the board of a company. I think it is wholly desirable to encourage the practice of employees working their way up and also investing their savings in the business in which they are engaged. I think that is an argument that has been used by the Government over and over again, so that the Government are, in fact, in agreement with the principle of this new Clause.
I do not suppose it was ever thought that other limitations would impinge on this particular aspect of an employee working his way up and taking his place on the board of directors. As we know,

he would only be allowed to invest 5 per cent. in that company, after which any of the remuneration which was paid to him would, of course, be subject to profits tax. I am suggesting in this new Clause that that limitation of 5 per cent. should be increased to 10 per cent. I think it is altogether desirable, and I think it is in accordance with the principles that we have heard over and over again in this House. I do not suppose it is necessary at this late hour to overemphasise the limitation which makes this expansion to 10 per cent. necessary.

Mr. Glenvil Hall: This matter was considered in 1947. We had considerable debates on this and ancillary matters and it was then decided—I think quite rightly—that the figure of five per cent. was reasonable. It is true that certain old employees do qualify for directorships in companies and no one wants to prevent that at all. In fact, the more people who rise from the bottom to the top within the industry to which they have devoted their lives, the more pleased most of us are. But we believe that a dividing line has to be drawn somewhere although I do not for a moment object to what the hon. and gallant Gentleman has said or to the fact that he has brought this proposal forward. We have examined it in a most sympathetic spirit, but think on reflection that the five per cent. limitation achieves the best result. I hope the hon. and gallant Member will agree and let it go at that.

Mr. Stanley: I regard the hon. Gentleman's answer as wholly unsatisfactory. Obviously he has given no consideration whatever to this point. He just read out what has been provided for him.

Mr. Glenvil Hall: I did not say we had not given this consideration. In saying he does not believe me, is the right hon. Gentleman branding me before the Committee as a liar?

Mr. Stanley: I should certainly never think of branding the right hon. Gentleman as a liar. I will admit at once he has given every possible consideration to the Clause and go on to say that quite obviously he has not appreciated the point. The fact is that this is a perfectly simple point. Everybody agrees that we want to encourage working whole time


executives being put on boards of companies and nobody wants to do anything which can stop that process, unless it is going to result in a serious loss of revenue. We have had no word from the right hon. Gentleman as to the loss of revenue the acceptance of this Clause would imply. Surely in the serious consideration he has given to this, he has gone into that point. Can he tell us now?

Mr. Glenvil Hall: The loss of revenue does not come into it at all. If this would lead to a widespread movement whereby workers were appointed working directors because of the increase from five per cent. to ten per cent., obviously the tax limit of 1947 might make some small difference of revenue, but that was not the point on which I objected. The objection I made was that within the last year the House has gone into this question and accepted the figure of five per cent. as reasonable. I do not want to argue it any further than that.

Mr. Stanley: The argument now is that because the House did something two years ago, it must now inevitably do the same thing. It may well be that during the two years which have elapsed, a certain amount of experience has been gained and cases may have arisen where five per cent. has acted as a deterrent. The right hon. Gentleman had told us that so far as he knows there is likely to be no appreciable loss to the Revenue in this proposal. If that is so, what earthly objection has he to accepting it? Why do we not make certain that no one deserving of becoming a wholetime executive will be stopped from becoming a member of a board? Up to now the right hon. Gentleman has confined his acceptance of Amendments to those which entail no loss of revenue. Here is one which at the same time achieves an object which all sides have in common. We cannot accept that the only reason he will not accept the Amendment is that this was decided in 1947 and because of that, any subsequent experience must be ignored.

Mr. Frederic Harris: Here we have a peculiar situation. The law as it stands today is really a practical deterrent to people who wish to get on and become directors of their companies. A five per

cent. interest in a business today, of whatever size it may be, is a very small holding. Ten per cent. is something which is much more practicable and I think is something which does give encouragement and the desire to go ahead and invest money in companies with which people desire to work. As it stands at the moment, the idea behind the law is that any extra money people might have has to be put into some business in which they are not actually working.
1.30 a.m.
That seems most extraordinary to me. Surely if a man is prospering sufficiently in a business for the company to recognise his abilities by making him a director, it is ridiculous to say that because of the present provisions the man may not put into the business any little extra savings he may have or else he cannot be made, a director, and that he must put the money in some other business. Surely the Government's policy is that people should plough back into their business any little extra money which they can make. The Financial Secretary has made it clear that at the present stage anyhow it is not a question of cost. In those circumstances, the Government should be able to give encouragement to a man who reaches the happy position of being a director by allowing him a holding of 10 per cent. The present position is crazy. The proposal is worthy of sound consideration for the practical benefit of many people.

Colonel Haughton: I well remember the Debates we had on kindred subjects on the Finance Bills of last year and the year before, and I have most pleasant recollections of the Chancellor of the Exchequer and the Financial Secretary making slight alterations which were very fair and did a lot of good in relation to things like director-controlled companies. They did not cost the Treasury anything, and they provided an incentive and did good all round. Every Finance Bill gives an opportunity of bringing forward the matter of the investment which an employee may have in a company when he goes forward to the board, without making a surcharge on the company in so far as his remuneration is concerned. The Financial Secretary will bear me out that concessions were made in 1947 and 1948, and I hope that before we part he will concede this point.

Mr. O. Poole: I do not apologise for raising this matter at this stage because it is a subject about which I feel particularly strongly and one which affects me directly. I want to tell the Financial Secretary of the predicament in which I find myself about these provisions. When the matter was raised in 1947, I took part in the Debates, and, like my hon. and gallant Friend the Member for Antrim (Colonel Haughton), I am grateful for the concessions made. I am concerned with a family business over 150 years old. It has been the tradition for at least four or five generations that the vast majority of the directors shall be people who began in the business as office boys or junior clerks and have worked their way up.
We want energetic young men, who join the company as juniors, to become perhaps members of a board at between 30 and 40, when they can give many years' service. All the partners in my firm, with the exception of myself, started as office boys. It has been not only my desire, but that of my partners, to give these people when they become directors a considerable shareholding and participation in the profits of the company. I believe that is extremely desirable. I know that I represent everything which hon. Gentlemen opposite dislike, being a person who has inherited a business which has been in the family for long generations, but I believe the small family businesses and firms, with long family tradition and association, play a real part in the life of this country. It is because firms like ours have permitted people from lowest level consistently for a 100 years to rise in the firm that they have prospered over that time.
The effect of these restrictions on the number of shares that can be held, and the share of participation that we can give to those who serve a company, must be appreciated. I said this in 1947, and I make no apology for repeating it now. I do not believe that my business is an isolated case. I believe that there are many hundreds all over the country, and I consider the Government should do everything they can to encourage them. Every possible restriction should be done away with. In our case, and the Financial Secretary can argue this against me, we consider that people should participate in the profits. We have allowed them

to do so, and the fact that this has been an embarrassment and not a deterrent, does not alter the fact that I do not think it right that this deterrent should exist. This is not a matter which will cost the Exchequer much, if anything at all, and I seriously urge the point of view I have put forward for it is typical I believe of hundreds and possibly thousands of firms. This is not a party point. It is a matter of general principle. It is agreed on both sides of the Committee that everyone should be given a chance of working their way up, and nothing should be done to discourage them.

Viscount Hinchingbrooke: I support this Clause for reasons associated with those put forward by the hon. Gentleman the Member for Oswestry (Mr. O. Poole). Surely we ought to encourage a man financially in the business he directs. When an able member of a business, who has risen by sheer ability and is earning a handsome salary, comes to the crucial moment when he is intimately associated with the direction of that business, we ought to suggest that more financial inducement should be given to him to put his earnings and his salary into that business, to acquire a shareholding and have a stake in the business in which it may be difficult for him to sell out easily if he should want to do so. We have seen the general shareholder eliminated in the control of great businesses. We have seen the managerial class come into existence. There is a suggestion that the managerial class are beginning to develop techniques of administration which enable them to switch themselves and their ability in and out of businesses. We do not want that. We want the principle of unlimited liability to operate much more often than it has before, and the whole principle of absentee landlordism to disappear.
The reply given by the Financial Secretary has been one of the most distressing in a distressing series throughout these Debates. This is a thing that does not cost anything, so that argument has disappeared; but all the Financial Secretary could say was that two years ago the House of Commons decided to make this 5 per cent., that he has looked at our proposal sympathetically but on the whole favours 5 per cent., because it was decided two years ago. No attempt has been made to


look into the pros and cons of raising it from 5 to 10 per cent., and giving the reasons to the Committee. It is distressing to find the right hon. Gentleman, a most agreeable and most able man—if he were not so able he would not have kept his post for four years—giving us that kind of advice. I beg him to look

at some of these proposals more seriously, and to be prepared with replies that are adapted to the cases we put.

Question put, "That the Clause be read a second time."

The Committee divided: Ayes, 91; Noes, 211.

Division No. 192.]
AYES
[1.45 a.m.


Amory, D. Heathcoat
Gage, C.
Noble, Comdr. A. H. P.


Assheton, Rt. Hon. R.
Galbraith, Cmdr. T. D. (Pollok)
Nutting, Anthony


Astor, Hon. M.
Galbraith, T. G. D. (Hillhead)
Odey, G. W.


Baldwin, A. E.
Gates, Maj. E. E.
Pickthorn, K.


Beamish, Maj. T. V. H.
Gomme-Duncan, Col. A.
Poole, O. B. S. (Oswestry)


Birch, Nigel
Grimston, R. V.
Raikes, H. V.


Boles, Lt.-Col. D. C. (Wells)
Hare, Hon. J. H. (Woodbridge)
Rayner, Brig. R.


Bowen, R.
Harris, F. W. (Croydon, N.)
Renton, D.


Bower, N.
Haughton, S. G.
Roberts, Emrys (Merioneth)


Boyd-Carpenter, J. A.
Henderson, John (Cathcart)
Ropner, Col. L.


Braithwaite, Lt.-Comdr. J. G.
Hinchingbrooke, Viscount
Ross, Sir R. D. (Londonderry)


Buchan-Hepburn, P. G. T.
Hollis, M. C.
Spearman, A. C. M.


Carson, E.
Hope, Lord J.
Stanley, Rt. Hon. O.


Challen, C.
Howard, Hon. A.
Strauss, Henry (English Universities)


Channon, H.
Hudson, Rt. Hon. R. S. (Southport)
Stuart, Rt. Hon. J. (Moray)


Clarke, Col. R. S.
Hurd, A.
Taylor, C. S. (Eastbourne)


Conant, Maj. R. J. E.
Hutchison, Lt.-Cm. Clark (E'b'rgh W.)
Teeling, William


Corbett, Lieut.-Col. U. (Ludlow)
Hutchison, Col. J. R. (Glasgow, C.)
Thomas, J. P. L. (Hereford)


Crookshank, Capt. Rt. Hon. H. F. C.
Langford-Holt, J.
Thornton-Kemsley, C. N.


Crosthwaite-Eyre, Col. O. E.
Legge-Bourke, Maj. E. A. H.
Thorp, Brigadier R. A. F.


Crowder, Capt. John E.
Linstead, H. N.
Turton, R. H.


Cuthbert, W. N.
Lloyd, Selwyn (Wirral)
Wadsworth, G.


Digby, Simon Wingfield
Lucas, Major Sir J.
Wakefield, Sir W. W.


Dodds-Parker, A. D.
Lucas-Tooth, Sir H.
Ward, Hon. G. R.


Drewe, C.
McFariane, C. S.
Wheatley, Colonel M. J. (Dorset, E.)


Dugdale, Maj. Sir T. (Richmond)
Macmillan, Rt. Hn. Harold (Bromley)
Williams, C. (Torquay)


Eccles, D. M.
Macpherson, N. (Dumfries)
York, C.


Foster, J. G. (Northwich)
Maitland, Comdr. J. W.
TELLERS FOR THE AYES:


Fox, Sir G.
Maude, J. C.
Commander Agnew and


Fraser, H. C. P. (Stone)
Mellor, Sir J.
Brigadier Mackeson.


Fraser, Sir I. (Lonsdale)
Neven-Spence, Sir B.



Fyfe, Rt. Hon. Sir D. P. M.
Nicholson, G.





NOES


Adams, Richard (Balham)
Comyns, Dr. L.
Freeman, J. (Watford)


Albu, A. H.
Cook, T. F.
Freeman, Peter (Newport)


Alexander, Rt. Hon. A. V.
Corbet, Mrs. F. K. (Camb'well, N. W.)
Gaitskell, Rt. Hon. H. T. N.


Attewell, H. C.
Crawley, A.
Ganley, Mrs. C. S.


Awbery, S. S.
Crossman, R. H. S.
Gibson, C. W.


Bacon, Miss A.
Cullen, Mrs. A.
Gilzean, A.


Barton, C.
Daines, P.
Glanville, J. E. (Consett)


Bechervaise, A. E.
Dalton, Rt. Hon. H.
Gordon-Walker, P. C.


Berry, H.
Davies, Edward (Burslem)
Griffiths, D. (Rother Valley)


Beswick, F.
Davies, Ernest (Enfield)
Guest, Dr. L. Haden


Bing, G. H. C.
Davies, Harold (Leek)
Gunter, R. J.


Binns, J.
Davies, Haydn (St. Pancras, S. W.)
Guy, W. H.


Blackburn, A. R.
Deer, G.
Haire, John E. (Wycombe)


Blyton, W. R.
Delargy, H. J.
Hale, Leslie


Braddock, Mrs. E. M. (L'pl. Exch'ge)
Diamond, J.
Hall, Rt. Hon. Glenvil


Braddock, T. (Mitcham)
Dobbie, W.
Hamilton, Lieut.-Col. R.


Brook, D. (Halifax)
Dodds, N. N.
Hannan, W. (Maryhill)


Broughton, Dr. A. D. D.
Driberg, T. E. N.
Haworth, J.


Brown, George (Belper)
Dugdale, J. (W. Bromwich)
Henderson, Joseph (Ardwick)


Brown, T. J. (Ince)
Dye, S.
Herbison, Miss M.


Bruce, Maj. D. W. T.
Ede, Rt. Hon. J. C.
Hewitson, Capt. M.


Burden, T. W.
Edwards, W. J. (Whitechapel)
Hobson, C. R.


Burke, W. A.
Evans, Albert (Islington, W.)
Holman, P.


Butler, H. W. (Hackney, S.)
Evans, John (Ogmore)
Horabin, T. L.


Callaghan, James
Evans, S. N. (Wednesbury)
Houghton, A. L. N. D.


Carmichael, James
Ewart, R.
Hoy, J.


Castle, Mrs. B. A.
Fairhurst, F.
Hubbard, T.


Chamberlain, R. A.
Farthing, W. J.
Hudson, J. H. (Ealing, W.)


Champion, A. J.
Fernyhough, E.
Hughes, Emrys (S. Ayr)


Chetwynd, G. R.
Fletcher, E. G. M. (Islington, E.)
Hughes, Hector (Aberdeen, N.)


Cocks, F. S.
Foot, M. M.
Hughes, H. D. (W'lverh'ton, W.)


Collindridge, F.
Forman, J. C.
Hynd, H. (Hackney, C.)


Collins, V. J.
Fraser, T. (Hamilton)
Hynd, J. B. (Attercliffe)




Irving, W. J. (Tottenham, N.)
Paget, R. T.
Stross, Dr. B.


Jay, D. P. T.
Paling, Will T. (Dewsbury)
Stubbs, A. E.


Jones, D. T. (Hartlepool)
Palmer, A. M. F.
Symonds, A. L.


Jones, Elwyn (Plaistow)
Pargiter, G. A.
Taylor, R. J. (Morpeth)


Jones, J. H. (Bolton)
Parkin, B. T.
Thomas, D. E. (Aberdare)


Keenan, W.
Paton, J. (Norwich)
Thomas, I. O. (Wrekin)


Kinley, J.
Peart, T. F.
Thomas, George (Cardiff)


Lang, G.
Popplewell, E.
Timmons, J.


Lavers, S.
Price, M. Philips
Tolley, L.


Lee, Miss J. (Cannock)
Proctor, W. T.
Ungoed-Thomas, L.


Leonard, W.
Pryde, D. J.
Vernon, Maj. W. F.


Levy, B. W.
Randall, H. E.
Wallace, G. D. (Chislehurst)


Lewis, J. (Bolton)
Ranger, J.
Wallace, H. W. (Walthamstow, E.)


Logan, D. G.
Rankin, J.
Warbey, W. N.


Longden, F.
Reid, T. (Swindon)
Watkins, T. E.


McGhee, H. G.
Rhodes, H.
Webb, M. (Bradford, C.)


Mack, J. D.
Ridealgh, Mrs. M.
Weitzman, D.


McKay, J. (Wallsend)
Robens, A.
Wells, P. L. (Faversham)


Mackay, R. W. G. (Hull, N. W.)
Robinson, Kenneth (St. Pancras, N.)
West, D. G.


McKinlay, A. S.
Rogers, G. H. R.
Wheatley, Rt. Hon. John (Edinb'gh, E.)


McLeavy, F.
Ross, William (Kilmarnock)
Whiteley, Rt. Hon. W.


Macpherson, T. (Romford)
Royle, C.
Wigg, George


Mallalieu, J. P. W. (Huddersfield)
Sargood, R.
Wilcock, Group-Capt. C. A. B.


Mann, Mrs. J.
Shackleton, E. A. A.
Wilkes, L.


Manning, C. (Camberwell, N.)
Sharp, Granville
Wilkins, W. A.


Mellish, R. J.
Shawcross, C. N. (Widnes)
Willey, F. T. (Sunderland)


Middleton, Mrs. L.
Shurmer, P.
Willey, O. G. (Cleveland)


Mikardo, Ian.
Silkin, Rt. Hon. L.
Williams, J. L. (Kelvingrove)


Millington, Wing-Comdr. E. R.
Silverman, J. (Erdington)
Williams, Ronald (Wigan)


Mitchison, G. R.
Silverman, S. S. (Nelson)
Williams, W. T. (Hammersmith, S.)


Monslow, W.
Simmons, C. J.
Williams, W. R. (Heston)


Morris, Lt.-Col. H. (Sheffield, C.)
Skinnard, F. W.
Willis, E.


Morris, P. (Swansea, W.)
Smith, C. (Colchester)
Wills, Mrs. E. A.


Nally, W.
Smith, S. H. (Hull, S. W.)
Wyatt, W.


Neal, H. (Claycross)
Snow, J. W.
Yates, V. F.


Nicholls, H. R. (Stratford)
Sorensen, R. W.
Younger, Hon. Kenneth


Noel-Baker, Capt. F. E. (Brentford)
Soskice, Rt. Hon. Sir Frank
TELLERS FOR THE NOES:


Orbach, M.
Stokes, R. R.
Mr. Pearson and Mr. Bowden.

New Clause.—(LAW COSTS OF TAX APPEALS.)

Paragraph (a) of Rule 3 of the Rules applicable to Cases I and II of Schedule D, Income Tax Act, 1918, shall be amended by the addition of the following words:
Provided that the expenditure incurred in obtaining a decision of the General or Special Commissioners for Income Tax or of any appeal therefrom touching the computation of the profits or gains to be charged to income tax (including surtax), profits tax or any other tax on the profits to be levied hereafter, shall be regarded as money wholly and exclusively laid out or expended for the purposes of the trade profession employment or vocation unless the tribunal giving the decision certifies that the appeal is vexatious."—[Mr Selwyn Lloyd.]

Brought up, and read the First time.

Mr. Selwyn Lloyd: I beg to move, "That the Clause be read a Second time."
There may be considerable doubt as to the beneficent effects of the various actions of the Government over the past four years, but two professions which may look forward to a full and stable future, with much activity for years to come, are the legal and accountancy professions. The mass of legislation which has been put on the Statute Book will mean that they will be in great demand, for it is impossible for any business concern to

know, without professional advice, what is its own financial position; what its taxation position should be; to what extent it will have to make provision for future taxation, and to what extent its present resources will be called upon to meet old taxation.
If anybody wants proof of the truth of the submission which I put to the Committee, they have only to try to study the Sixth Schedule to this Bill. I defy any person in this Committee who is not fully qualified and highly experienced in taxation matters, to understand it. In fact, I would say that not more than three persons in the Committee understand it, and I do not include myself—probably, that is a liberal estimate. It is a highly complicated Schedule, and one for which it is absolutely necessary that the busines man should have professional advice before learning his taxation position. If he is to embark on litigation for the purpose, he should, I claim, be allowed to count the cost as deductible expenses. He may have to have a long and costly law suit, and he may have to go all the way to the House of Lords before the position is finally given in his favour, and, assuming that the decision is in his favour, it nevertheless involves him in substantial expenditure. He may even


be put to a substantial expenditure in order to prove that he is right and that his view of the tax position of his company is right. It seems to me to be quite ridiculous to say that such moneys are not proper expenses of the business. The same position, I submit, applies whether they are proved to be right or wrong.
In the case of an insurance company, for example, which has to go to litigation to prove that one of its insured has been negligent, I submit that that must be accepted as a legitimate expense of the company's business. That is a direct analogy with the tax position and I see no reason why such expenses could not be legitimately allowed. I do not suggest that the actual wording of the Clause is perfect. It may well be capable of being improved in certain, respects, but I ask the right hon. and learned Gentleman to accept it in principle. If he says he will look at it and consider it between now and the Report stage, I will later ask leave to withdraw it.

The Solicitor-General: I hope that the Committee will not desire to pass this Clause at this stage because this problem, probably more than any other problem that we have discussed this evening, is par excellence one for the committee which will investigate the basis on which profits should be computed. The question of the costs of successful appeals in tax matters has just been pronounced upon by the House of Lords which, by a majority of three against two, decided that these costs could not be said fairly to be costs of earning profits and that they were not costs which a trader incurred in his capacity as a trader. That was decided by the House of Lords after examining this extremely difficult matter, and as to which it is extraordinarily difficult to reconcile conflicting statements of view pronounced in the course of various judicial decisions on costs.
It is not as if we could adopt the Clause and alter the law, because we would then have to consider a whole number of other similar problems. The Clause deals only with the legal costs of a tax appeal. If we dealt with that, we would be drawn into dealing with costs of other legal proceedings. There is by no means any unanimity among judges with regard to the various categories of costs, and their decisions are not easy to reconcile. Not only would we have to deal with the posi-

tion of costs under Schedule D of a trader who was assessed under Schedule D, but we would have to deal with costs under Schedule E where he was assessed under that Schedule.
I hope the Committee will agree that this is a vast and complex problem which cannot be considered in isolation from other similar problems relating to the costs of proceedings in the courts. I hope they will agree that the most expeditious and sensible way is not to ask the Government between now and the Report stage to take steps and regard the costs of tax appeals in isolation, but to leave it to the committee to investigate exhaustively with the hope that they may recommend a course of action.

Captain Crookshank: Can the right hon. and learned Gentleman give a guarantee that in fact the committee will consider this point?

The Solicitor-General: It would be within their terms of reference.

Mr. J. Foster: I think that some of this could be taken in isolation. At the moment it is an injustice, as it seems to the layman, that when a firm, business, company, or a person in trade has an Income Tax appeal which deals wholly with the question of what are profits or gains, the law costs incurred in winning the case against the Income Tax Commissioners should not be counted as deductible. It is possible to isolate that. Why not start on a section and improve that? Why not start on some part of this problem which to the layman is obviously unjust? Then one will find that the other anomalies and difficulties can be dealt with at leisure.
2.0 a.m.
In my submission the wording of this Clause deals only with a situation well on one side of the line. The view of the two dissenting noble Lords in the House of Lords should be adopted, and in this case the Solicitor-General's argument should be reversed. The Treasury are glad to come along and reverse a decision when the taxpayer has scored a success, and to put in a new Clause or Amendment to the Finance Bill. They ought to do it the other way, too, when it is quite obvious, not only to the man in the street, but also to the accountant at his desk, that it is quite anomalous that expenses of this kind should have to come out of


profits. That does not make much sense, and I suggest to the Committee that they should pass this new Clause or get an assurance from the Government that they will look into it between now and the Report stage to see whether they can improve upon the small section dealt with. It will not help the Committee to leave untouched a section which can obviously be remedied without any great difficulty.

Mr. H. Fraser: While appreciating the Solicitor-General's arguments that this is a very wide problem, I suggest that it is conceivable that the terms of reference of the committee to which he has referred do not cover the whole matter. In the meantime, as my hon. Friend has said, there exists a fairly narrow and glaringly obvious anomaly. It is that individuals who have to interpret this very complicated Bill and various complicated finance Measures have to have recourse to extremely expensive legislation at a very high level. It is right that we should immediately press for redress for such persons. I think that the Solicitor-General has tried to escape the issue by going into a barrage of remote future possibilities, when only today we have seen that the Minister of Health has dispensed with the services of one of the most important committees ever set up—that to investigate local government boundaries. The right hon. and learned Gentleman says: "Wait and be reasonable; these anomalies will be remedied when one of these multifarious committees makes an investigation and reports in a few years' time, when action will be taken." Surely action should be taken now?

Mr. Henry Strauss: I think that the ground on which the right hon. and learned Gentleman the Solicitor-General resisted this new Clause is not very convincing. Without any hesitation I accept his assurance that this matter will be within the terms of reference of the committee, but I take it that he will not deny that a great many matters that we have already considered in this Bill are also within the terms of reference. Nevertheless, on the Government's recommendation, this committee has seen fit to take a line about them. There is no reason to think, even

if we adopted this Clause, or whatever better wording may be preferred by the Government, that such action would take the matter out of the terms of reference of the committee. They could make recommendations on the law as it would then stand. I agree with my hon. Friend the Member for Northwich (Mr. J. Foster) that the very fact that the House of Lords was so divided on this subject is a good reason why the Committee should take a definite line. That definite line, I suggest, should be that which has been suggested in all the speeches made and of which the force is not denied by the Solicitor-General, although he has given a very inadequate reason for not passing the new Clause now—namely, that the matter would be within the committee's terms of reference.

Mr. Assheton: I think that the Solicitor-General was very sympathetic towards this new Clause, but I was a little disappointed with what he told the Committee. The case has been made by my hon. and learned Friend who moved the new Clause and strongly supported by several other hon. Members. I do not think that anything that was said by the Solicitor-General led the Committee to believe that he was not in sympathy with it. He told us that he did not think it went far enough. I understand that, but do not think it any reason for what he has put forward. Will the Solicitor-General undertake to put to the committee the problem which this Clause raises? If he will give that undertaking, perhaps my hon. and learned Friend will take a different view.

The Solicitor-General: It is within the terms of reference, which are very general and clearly cover this matter. The committee clearly will be conscious of what has taken place in this Debate and I should have thought that was sufficient.

Mr. Assheton: But will the Solicitor-General draw attention to it? It will obviously be a matter to which the committee will give careful attention if the Solicitor-General asks it to do so.

Mr. McKinlay: May I ask your guidance, Major Milner, to clear up this point? Is it within the province of the Opposition to draw the committee's attention to this matter?

The Chairman: I do not think that question is one for me, but I imagine it is competent for anyone to bring any matter to the attention of any committee. Whether the committee takes action or not is a matter for the committee itself.

The Solicitor-General: I do not want to be finicky and obstinate about this, but I thought the procedure was that, when a committee is appointed and given terms of reference and when matters will be obviously perfectly clear to it, we should leave it to the committee's discretion as to how to discharge all the functions with which it is entrusted. I have no doubt the committee will read what has taken place and, this being one of the most discussed problems in the Income Tax law, I should be surprised if it did not give attention to it.

Mr. Assheton: I saw the Solicitor-General nod his head when I asked him to invite the attention of the committee to this matter. Is he now withdrawing the nod, or not?

Several Hon. Members: Several Hon. Members rose—

The Chairman: I hope hon. Members will allow us to come to a decision on this matter. With every respect to the Committee, it would appear to me that when a firm reply has been given by the Government hon. Members might consider how far it is desirable or necessary to proceed with the Debate in present circumstances. I venture to hope they will give that consideration.

Mr. C. Williams: I very much agree with what you say, Major Milner, but really that does not settle the point. It is the duty of Members of the House of Commons to get grievances remedied, and whatever the Solicitor-General has said tonight, he is no nearer to getting a real grievance remedied at the present time; and as long as I have anything to do with the House of Commons, I shall do all I can to get the grievances of my constituents put right, whatever anyone else may say. The first reason the Solicitor-General gave was one of the most completely futile that even he has made in this Committee. As regards this Clause, he said that he could not remove the grievance because if he removed this grievance it would lead to another grievance having to be removed. That really is not the position which should be taken up in the House.
On this new Clause, we are being given a chance to put a matter right. There is no doubt at all that the average layman believes that when he takes a complicated legal matter to a very high court and that involves enormous expense connected with his business, it ought to be a business expense. By a very bare and very narrow majority in the House of Lords, an opinion was given otherwise. All I can say is that this is obviously one of the cases where the House of Commons should decide and make laws of its own. There can be very little doubt that, in any of the instances which we have had put to us by our legal friends tonight, there has been no case on the other side. There has been nothing laid down by the Treasury, who are going to lose a lot of money.
2.15 a.m.
I would point out to the Committee that during the last year we have passed a Bill giving legal help to a vast number of poor people. I only use that as an illustration. It shows there is a general desire in the House to do justice in legislation of this kind. When we have a chance like this to put a matter right and see that the very heavy charges come out of the business affairs of a firm, I think we should have been treated with greater courtesy and help by the Government than we have been. It is easy for hon. Members opposite to take no notice of the vast burdens which the poor business people have to bear today. Our party would like to see this injustice remedied. Whenever the Treasury lose a case they put it right as quickly as they can, but whenever the taxpayer loses they never miss a chance under the present régime of weighting the balances against the taxpayer, sometimes in a dishonest way.

Mr. Selwyn Lloyd: I do not think the right hon. and learned Gentleman has been as gracious over this matter as he might have been. I ask him to consider once again the matter which we are impressing upon him. As a result of this discussion, I have no doubt that the Committee will examine this proposal, and I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(AMENDMENT TO FINANCE ACT, 1932, SECTION 10.)

Reference to machinery in section ten of the Finance Act, 1932 (which enables the Treasury by licence to authorise the duty-free importation of machinery), shall be deemed to include references to plant and parts of and accessories for machinery or plant.—[Lieut.-Commander Braithwaite.]

Brought up, and read the First time.

Lieut.-Commander Braithwaite: I beg to move "That the Clause be read a Second time."
The object of the new Clause is to aid the operation of section 10 of the Finance Act, 1932, by extending the authority of the Treasury to issue duty-free import licences to cover spare parts of machinery. Under this section of the Finance Act, 1932, free import licences could be issued by the Treasury provided that two conditions were fulfilled, the first being that
having regard to all the circumstances it is expedient that the consignment should be allowed to be imported without payment of duties under the Import Duties Act, 1932,
and the second condition being that
similar machinery is not for the time being procurable in the United Kingdom.
Since then, several Amendments have been made to that Act, notably by Section 8 of the Finance Act of 1934 and Section 1 of the Import Duties (Emergency Provisions) Act, 1939. But those Amendments have not altered the original provisions which I have just quoted to the Committee. Subsection (2) of Section 10 lays down that the Section shall apply to "any class or description of machinery." I think that makes it clear that it was the intention of this House at that time to give the widest possible application, where circumstances warranted, to such exemption from import duties.
No difficulty is experienced in obtaining a duty-free import licence from the Treasury where the necessary conditions apply and where a complete machine is being imported. The position with regard to spare parts is very different. In many cases the spare parts are only obtainable abroad. The trouble which has developed is that despite the intention which is clearly laid down in the 1932 Finance Act, that wide application of exemption should be afforded in suitable cases to cover all types and classes of

machinery, the present policy of Government departments is to interpret that variety of exemption as applying only to complete machines and not to the machine parts.

Mr. John Lewis: Will the hon. and gallant Gentleman make it clear—

Lieut.-Commander Braithwaite: No, I cannot give way. This is an important technical matter, and if the hon. Member takes exception to anything I may say, I have no doubt that he will have the opportunity of catching your eye, Major Milner—

Mr. Lewis: It is not an objection. I want something made clear about the machinery imported—

Hon. Members: Order.

Lieut.-Commander Braithwaite: I am not giving way to the hon. Member.

Mr. Lewis: The hon. and gallant Member should read his brief and find out.

Lieut.-Commander Braithwaite: If the hon. Member is incapable of listening to a case being put, he has one of two remedies. One is to conduct himself as an hon. Member of the House of Commons, and the other is to leave the Chamber. Perhaps I may continue with my speech.

Mr. Lewis: On a point of Order—

Lieut.-Commander Braithwaite: I cannot give way.

The Chairman: No point of Order arises.

Mr. Lewis: With great respect, Major Milner, you have not heard—

The Chairman: The hon. Gentleman must resume his seat. No point of Order can possibly arise. The hon. Gentleman is not entitled to speak unless the hon. Member addressing the Committee gives way, and the hon. and gallant Gentleman the Member for Holderness (Lieut.-Commander Braithwaite) has not given way.

Mr. Lewis: I appreciate that Ruling, but I was going to ask on a point of Order whether the hon. and gallant Gentleman was in order in suggesting that my conduct would make it necessary


for me to leave the Chamber. In my view that is a matter which only you can decide. In the circumstances, ought not the hon. and gallant Gentleman to be called upon to withdraw.

The Chairman: I was not clear that the hon. and gallant Gentleman put that interpretation upon his words. In any case the hon. Member rather brought the remark upon himself. Lieut.-Commander Braithwaite.

Lieut.-Commander Braithwaite: I was endeavouring to point out that under the procedure which is at present being applied by Government Departments it appears to us, though not apparently to the hon. Member for Bolton (Mr. J. Lewis), that a distinction is made between the importation of complete machines and that of machine parts. The result of this anomalous restriction is that while comparatively minor items such as typewriters and bicycles, which fall within the definition of a machine as such, qualify for exemption, major items such as a body for a large press, complete with moving parts, would receive no exemption and nor do the vital spare parts without which, in a great many cases, the plant and machinery must stand idle and unproductive.
In addition to that distinction, another is being made as between plant and machinery, and there appears to be no clear-cut definition of plant under which the departments are operating. It seems that in practice they classify static equipment such as a chemical bath as constituting plant, and do not consider such equipment for exemption. This arbitrary distinction between a machine with moving parts and one without, seems to be unreal because both these types are equally necessary to industry and in some cases they are dependent in their action. [HON. MEMBERS: "Dependent."] I should have said "interdependent."

Mr. Attewell: Was it a typist's error?

Lieut.-Commander Braithwaite: As I explained earlier in the evening it is very easy for hon. Members to sneer when one is endeavouring to put across a rather difficult case. No complaint is made when the right hon. and learned Gentleman the Solicitor-General or the Financial Secretary makes use of what are known as "copious notes" to deal with complica-

ted matters, and if it is the intention of the hon. Member for Harborough to sit there and sneer he is not treating me in particular, or the Committee in general, in the proper way. It is quite true, I have here very heavy annotations in order to support this case, and I do not think, if the hon. Gentleman was endeavouring to deal with this matter, he could do it out of his head and without notes. As regards this question of machine parts—[Interruption]—This is not a laughing matter for industry.

Sir W. Wakefield: It is causing unemployment.

Lieut.-Commander Braithwaite: It would not even be a laughing matter for the constituents of hon. Gentlemen opposite. I am attempting to put across a matter which is causing a certain amount of anxiety to industry. I frankly admit I am now going to read from a typescript the details of a case in point which arose recently. The case arose in connection with the import from America of spinning jets used in the production of rayon yarn and staple. As a result of expansion in the industry it was found that British manufacturers of spinning jets could not, for the time being, meet all demands since the necessary drilling capacity was not available. The only way in which the production programme could be met was by having the jet cups fabricated and drilled in the U.S.A. by the parent company of the U.K. firm who normally carry out the work. The metal from which the jets are compounded is in large part platinum, but they also contain gold. In order to reduce dollar expenditure to the minimum, old jets were melted down, the precious metal extracted, and arrangements were made to transport the ingots to the U.S.A. for fabrication and drilling.
The necessity for that procedure was recognised by the Government Departments concerned, and the required import licence was readily given, but after very lengthy negotiations during which, in order to avoid a further production hold-up, the metal was exported and the work commenced, exemption from import duty was refused on the ground that the jets were merely part of a machine and did not qualify under Section 10 of the Finance Act of 1932. The effect on industrial costs and efficiency of discrimination of this kind against machine parts


and plant is obvious, as is the point which the new Clause raises for the consideration of the Committee. At present the exemption is given only in cases where the Board of Trade and other Government Departments are of the opinion that the circumstances of the particular case warrant exemption. This new Clause does not propose any change in this provision. What it does propose however is that the exemption should not be restricted to complete machines, but should be widened to apply to the import of parts whenever, in the opinion of the Government Department concerned, they are urgently required, and are unobtainable from home sources. It further proposes that the narrow interpretation of machinery should be widened to include plant.

2.30 a.m.

Mr. J. Foster: In supporting the new Clause so ably moved by my hon. and gallant Friend, I would like to point out that the present position is that under the Section of the 1932 Act whole machines are allowed to be imported free of duty if, in the opinion of a Government Department, the circumstances of the case warrant it. The object of the new Clause is to alter that practice by allowing parts of machines to be imported, and for the definition of machinery to be extended to cover certain items which are at present excluded. For example, we know that we have only two mechanical brains in this country, one at Newcastle and one possessed by the Chancellor of the Exchequer. If the Government wish to improve their dealing with the Finance Bill they will need a few more mechanical brains. Some of the parts can be produced in this country but others cannot, and if these mechanical brains have to deal with Income Tax—and they are the only ones who can—it will be necessary that parts be imported free of duty.
It is necessary to expand certain export industries very quickly, and one finds that it will be of great advantage to this country if parts of machinery can be imported free of duty under Section 10, rather than making people import whole machines or go without the parts, and have to wait the longer time for delivery in this country. The reason for the new Clause is the rather restricted application of Section 10. It may be that the object would be met by a wider interpretation.

That is a matter I should have thought largely for administrative decision. We should be interested to hear from the Solicitor-General the reasons for which Government Departments have cut down the meaning and intention of Section 10 of the 1932 Act, as amended by subsequent legislation. The instances given by my hon. Friend are instances in which full productivity was hampered by the way this Section was interpreted. Obviously in the case of the platinum ingots which were sent to America to be turned into jets, and which then came back to England, duty was charged on them contrary to the spirit of Section 10. Duty was also charged on the melted down ingots—

Mr. J. Lewis: It is about the only case.

Mr. Foster: I do not think that makes it any better, it is still a case which should not have happened. Surely the hon. Member will give us credit for putting forward this new Clause because we think it will enable the general wish for increased productivity to be fulfilled to that extent. Another example was given by my hon. and gallant Friend—or perhaps he did not get as far as that. But if the hon. Member for Bolton (Mr. J. Lewis) says that is the only instance, I perhaps must detain the Committee for another few minutes giving the instance of sicromal steel coils from Germany to be used in the process of manufacturing acetic anhydride. These coils are inserted in brick-built furnaces and acetic acid vapour passes through them at 1,200 degrees Centigrade. At the time British manufacturers were not in a position to supply sicromal, nor were they able to produce a substitute alloy capable of withstanding the great temperatures and strains involved. The Board of Trade agreed to the importation of these coils but a duty-free licence was refused on the grounds that such equipment constituted a piece of static plant and was therefore inadmissible for duty remission. The argument is much too complicated and hon. Members are advised not to put it forward as the House of Commons will not understand it.

Mr. J. Hudson: Is it in Order for an hon. Member, after quite clearly reading from a lengthy brief, which he has confessed is the same brief as that from which the previous speaker also read


from at length—is it in Order, when there are clear rules about reading from documents, that this should be allowed?

The Deputy-Chairman: I am afraid it is a practice which is much too common to be stopped tonight.

Mr. J. Foster: As a matter of fact, on looking at what the hon. Member calls a "brief," I find that the sentence I was about to read is not there. It did appear that the words were there, but they are not there. It was done in another place by a Socialist noble Lord and by a Minister, and it can be seen in the Report of the House of Lords Debates. But joking apart, perhaps the learned Solicitor-General will tell us whether there are any reasons why Section 10 should not be dealt with in this way?

Mr. Glenvil Hall: Section 10 of the Act as amended enables the Treasury to authorise the duty-free importation of machinery. This does not include, and up to now never has included, plant and accessories. As I understand the new Clause, it proposes that for the first time, plant and accessories both for machinery and plant, should be included in these licences which are issued. The power is exercised, as I think the Committee knows, by the Board of Trade, which in turn seeks the advice of the Department concerned. Normally, now, that Department is the Ministry of Supply. The current practice, and I think this is borne out by the illustrations, in so far as we can follow them, which have just been given, is to licence productive machinery of a kind which cannot be procured in the United Kingdom.
I agree that the dividing line between what is plant and what is machinery is sometimes difficult to draw. Actually, for Customs purposes, I believe it never has been drawn in words, although normally when it comes to definition of a piece of machinery or plant actually in being, and under review, it is found not to be so difficult as one might imagine. If we accepted this Amendment it would mean the loss of a certain amount of revenue. But I do not put that forward as a reason why I cannot accept it.

Mr. Stanley: Surely the effect of this Clause is only to give power to the Board of Trade, and it is for that Department to use it or not.

Mr. Glenvil Hall: If the Board of Trade were given this power, it would be expected that it might exercise it, and we should lose some revenue; but I cannot say how much. One of the difficulties in accepting the suggestion is that this method is in existence to protect British industry; and I am rather surprised that right hon. and hon. Members opposite, who are always concerned with the future of British industry, should so glibly throw away that which, up to now, I have always understood they were anxious to preserve. Before a change of this sort is made, industry should be consulted and we should take some soundings to find if there is a general feeling that a change of this kind in these duty free licences should be undertaken.
The most that I can say tonight is that we will consider this, but, on reflection I must say that to include accessories, and parts of plant and machinery, is, I think the Committee will agree, a big obligation. On the advice given to me up to now the feeling is that it would be wrong to include accessories. They do not amount to a great deal in the aggregate; but so far as plant is concerned, we are very willing to look at this matter. We do not, however, think that the Committee should expect more at the moment, or that I should give a promise to move an Amendment on the Report stage. We cannot do anything until we have seen how industry would react to the change.

Mr. Assheton: I must confess that the right hon. Gentleman did not encourage me very much at the beginning of his remarks, but he has gone some way to meet the point raised. Useful illustrations have been given, and hon. Members opposite may not appreciate the fact, but it is not always easy for one to master the technicalities of some particular industry in which one is not engaged. Two hon. Members, I think, made a very good attempt to do so tonight. There was the reference to the import from America of jets for spinning rayon, and from my hon. Friend the Member for Northwich (Mr. Foster) there was the careful explanation about the steel coils. I would like the right hon. Gentleman to consider these two specific illustrations when he comes to look into the whole matter and see if he cannot give even a little more than he promised when he addressed the Committee just now.

Mr. Attewell: I should not have attempted to intervene at this advanced hour had it not been for the remarks of the Financial Secretary. This is a serious subject, and I want to give, if I may, an illustration from my own industry, of which particulars may be found within the Working Party report. If we are not careful, we shall find the spectacle of "tied" machines coming from other parts of the world and used in our industries to the exclusion of our own machinery. I would quote to the Committee the British United Machinery, which has the machinery of the boot and shoe industry in pawn.
2.45 a.m.
If we allow these spares to come in we may find that engineering firms in this country which are now able to make spares for this machinery will be unable to supply spares because the terms of contract or hire may be such that manufacturers will find it easier and cheaper to import them from overseas. Germany has been referred to. It is possible that industries may be financed in Germany so that spares can be used for machines in this country. I hope the Minister will take care to ascertain the views of the engineering industry especially those sections which supply spares. If we should find that industries are using not only machines but spares which come from abroad we shall be in a position where we may not be able to add improvements to them and we will then be at a disadvantage in competing with others.
Inventions and improvements to machines do not reach this country as quickly as they should because of this fact. If we build up industries so that we can supply spares we shall enable ourselves to expand and build the actual machines. We shall be able to get the patents if we pay the price. I hope the Minister will realise that although it may suit us at this moment when there is a strain on industry to import spares, in future years we may reach a different position.

Mr. Frederic Harris: Before the hon. Member sits down may I ask him if he is trying to tell the Committee that spares of machines are not being imported?

Mr. Attewell: I did not say that spares were not coming in but said that they

were coming in. I was asking the Committee to realise that if it is made easier to get them at a lower price than we can supply them in this country, our industries will suffer later.

Mr. Renton: The Financial Secretary, perhaps unwittingly, appeared to me to threaten a very important principle, that the purpose of import duties was to protect trade and not to raise revenue. He mentioned that the cost of allowing the Clause would be negligible. I think that was the effect of his remarks but I hope the cost will not weigh with the Government at all.

Mr. Glenvil Hall: I probably put it clumsily, I often do, I know, but what I tried to say was that there would be a certain loss of revenue. We did not put that forward as a serious argument here. There were other considerations some of which my hon. Friend (Mr. Attewell) has put lucidly. We must be careful in this matter and consult industry and see what their views are.

Mr. Renton: I am glad to have that assurance. I was surprised that the Financial Secretary replied on this Clause and not the Economic Secretary (Mr. Jay). I should have thought that the Clause concerned the Economic Secretary more than the Financial Secretary. As a Liberal converted to the idea of Protection, I welcome measures for the protection of British trade. But we have to be very careful indeed.
For example, with regard to agricultural machinery, we find that farmers are in possession of American combine harvesters imported during the war; that spare parts for those machines have been difficult to obtain, but that at the same time, British manufacturers have been doing their best to make those spare parts; and also that the Americans, fortunately both for us and for them, have started to make those spare parts in this country. Those are some of the complicated factors that we would have to bear in mind when seeing how this new Clause worked out in practice, but so long as the economic advantages and disadvantages are borne in mind all the time, and so long as no revenue producing considerations come into play, I


think we can rest assured that this Clause would be a very beneficial one.

Mr. C. Williams: I quite frankly hope that this Clause will be defeated. I have looked at it extremely carefully and I have listened with great care and interest to the speech made by the hon. Gentleman opposite. There can be no doubt that it is very nice and easy to come here tonight and say that there is this difficulty about spare parts. We all know of that difficulty. I know it as a farmer, but fundamentally, the 1932 Act is absolutely sound. We rebuilt the whole of our engineering system on that before the war. It was one of the greatest accomplishments of the time. I claim that this is really—I think accidentally—an appalling type of new Free Trade Clause. It might have come from the second bench below the Gangway. It is vary rare that I disagree with my own party, but it is obvious there has been a mistake made; so obvious that even the right hon. Gentleman, the Financial Secretary saw that it was against the best measures of Protection, and I hope that the Clause will be withdrawn.
Having said so much against my party, may I be allowed to congratulate the right hon. Gentleman the Financial Secretary on having at last committed himself, and I hope the Government, to the fact that protection of this kind is really essential in preserving and building up our industry. It is up to manufacturers to find out where these things are wanted and to make them, and make them quickly. That is one of the ways in which we got initiative in business people of this country before the war, and why we were successful during the war in turning out machinery. I ask my hon. and gallant Friend the hon. Member for Holderness (Lieut.-Commander Braithwaite) to withdraw the new Clause because I am sure that he did not realise that it should not have been put forward by any member of the Tory Party.

Sir W. Wakefield: The Financial Secretary said there would be some cost to the Exchequer. Surely he is wrong? The whole purpose of giving the new powers proposed in this new Clause is to enable accessories which cannot be obtained immediately in this country, to be imported in order that production will not be stopped, that employment can be maintained and that industry can be efficient. Surely that means increased

revenue for the Exchequer? The purpose of the new Clause is to help industry in this country through any temporary phase when machinery cannot be made in this country by enabling the importation of urgently-needed parts of machinery. I should have thought that was a very good provision to make. It was never intended, surely, that there should be a complete reduction of import duties or that this, country should be flooded with machinery from abroad? I am surprised that the hon. Member for Torquay (Mr. C. Williams) should make such a suggestion.

Mr. C. Williams: It is the sort of insidious thing which, unless pointed out quickly, may lead to trouble.

Sir W. Wakefield: This proposal is not to permit a flood of foreign machinery to come in but to enable special bits of machinery to come into the country in certain selected cases to speed up production, and make industry more efficient when machinery and spare parts cannot be obtained here. I think it a very reasonable new Clause and hope that in consultation with the industry concerned, the Government will give it sympathetic consideration.

Lieut.-Commander Braithwaite: May I say that the reason why we put down this new Clause was that we felt that the operation of Section 10 of the Finance Act, 1932, was not in accordance with the intention of Parliament when it was passed. The Financial Secretary said, I think, that he was shocked at the proposal. May I remind him that the Import Duties and Finance Acts of 1932 were passed when this country was being subjected to a severe foreign glut. It was made clear at the time that it was the intention of the then Government that the power should be flexible in cases where changes took place.
We are now in an entirely different situation and are endeavouring to cope with a grievous dollar shortage. An export drive is necessary and this new Clause merely sought to define the manner in which Section 10 of the Finance Act, 1932, should operate. Not for the reasons suggested by the hon. Member for Torquay (Mr. C. Williams)—who has not been as helpful in this discussion as he generally is—but because of the sensible manner in which the Financial Secretary has been good enough to meet the suggestion by saying that he is to have


consultations with industry, which seems a commonsense method, I ask leave to withdraw the new Clause. This short debate has been valuable in many ways, and the matter has been well ventilated—even if somewhat incompetently introduced by me.

Motion and Clause, by leave, withdrawn.

New Clause.—(REPLACEMENT ALLOWANCES.)

(1) Where on or after the sixth day of April, nineteen hundred and forty-nine, a person carrying on a trade incurs capital expenditure on the provision of buildings, machinery or plant for the purpose of the trade in replacement, modernisation or re-equipment of any buildings, machinery or plant first used before the sixth day of April, nineteen hundred and forty-five, there shall be made to him for the year of assessment in which the expenditure is incurred an allowance, in this section referred to as a "replacement allowance."

(2) For the purpose of determining the amount of a replacement allowance to be made to any person carrying on a trade, that person shall satisfy the Commissioners of Inland Revenue of the sum retained by him by way of a specific provision in his accounts in each basis period ending after the sixth day of April, nineteen hundred and forty-nine, for the purpose of the replacement, modernisation or re-equipment of buildings, machinery or plant for that trade and the Commissioners shall issue to him in respect of each such year a certificate (hereinafter referred to as a "capital replacement reserve certificate") for an amount equal to the said sum or such part thereof as does not exceed one-twentieth part of the total of the capital expenditure incurred in providing the buildings, machinery or plant used or available for use by that person for that trade on the sixth day of April, nineteen hundred and forty-five, and still so used or available for use on the last day of the basis period in question.

(3) The amount of the replacement allowance to be allowed to any person in respect of any year of assessment shall be a sum (not exceeding the amount of any capital expenditure incurred by him in that year in the replacement, modernisation or re-equipment of buildings, machinery or plant first used as aforesaid provided for that trade) equal to the aggregate of the sums shown on the capital replacement reserve certificates issued to him in respect of that trade less any sum allowed by way of replacement allowance to that person in respect of that trade since the sixth day of April, nineteen hundred and forty-nine.

(4) A replacement allowance shall be in addition to any other allowances made in respect of any buildings, machinery or plant and for the purposes of Rules 6 and 7 of the Rules applicable to Cases I and II of Schedule D a replacement allowance shall not be treated as a deduction or allowance on account of wear and tear.

(5) The provisions of Part VII of the Income Tax Act, 1945, shall have effect in relation to replacement allowances as if such allowances were allowances falling to be made under the provisions of that Act.—[Mr. Selwyn Lloyd.]

Brought up, and read the First time.

3.0 a.m.

Mr. Selwyn Lloyd: I beg to move, "That the Clause be read a Second time."
I must confess to the Committee that this is a long and complicated new Clause and the fact has to be considered after, I think, the Parliamentary day which is now about—

Lieut.-Commander Braithwaite: On a point of Order. I am sorry to interrupt my hon. and learned Friend. May I remind you, Mr. Bowles, when an Amendment on Clause 26 was not moved yesterday in order to conform to a voluntary time-table, the Chairman was good enough to indicate that the new Clause in my name dealing with Corporation Duty would be called now.

The Deputy-Chairman: I am quite aware of that. The hon. Gentleman is right. I had a word with the Chairman and he decided not to select it. Perhaps the hon. Member will put it down on Report stage?

Mr. Selwyn Lloyd: As I was saying, it is now nearly the 16th hour of this Parliamentary day and not at all the time when one would like to discuss a matter as complicated as this. But it does deal with a matter which we regard as very important. We do not consider that the Chancellor in doubling the initial allowance really goes quite far enough for reasons which I shall explain in a moment. Before I put forward the reasons for this new Clause, may I ask the Committee for a moment or two to look at its terms.
The first subsection says that the capital expenditure has to be incurred after the 6th April, 1949; it has to be incurred on the provision of buildings, machinery, or plant, and in replacement, modernisation, or re-equipment in respect of machinery or plant as used before 6th April, 1945. On the second subsection there is the point that the person claiming this replacement allowance has to satisfy the Commissioners that the sum has been retained by him by way of a specific provision—against the period


after 6th April, 1949—and then he gets a certificate and the amount of the certificate shall not exceed one-twentieth of the 1945 costs.
By subsection (3) the taxpayer cannot get a replacement allowance exceeding the aggregate certificates which he has already received less replacement allowance already given. The last two subsections are technical in character and it is not necessary to draw the attention of the Committee to them. I apologise for having dealt in detail with this Clause, but the discussion is meaningless unless hon. Members had an idea of how we are trying to tackle this problem. I do not claim any particular virtue for this method of tackling this problem, but if anyone tries to frame a Clause that will deal with this problem, he will find it extremely difficult to do it.
Is some such replacement allowance necessary? I should like to put before the Committee two points on that. Industry has been over-taxed in the past few years because net profits for purposes of taxation should only have been arrived at after provision had been made for maintaining the productive capacity of a concern. I gave the example on Second Reading of the firm of Horrockses, Crewdson and Company, and I repeat that example because the figures are easy to quote and show the point I am making. The productive capacity is estimated at £6 million. In order to maintain that productive capacity the firm had to set aside £150,000 per annum on a basis of 40 years for plant and machinery and 100 years for buildings. But for purposes of taxation the depreciation allowance given amounted to only £30,000. There was a deficit of £120,000 which had to be met by drawing upon the taxed profits. It needed nearly £250,000 of taxed profits for that firm to be able to maintain its productive capacity. This illustrates the first contention that industry has been overtaxed in these years. The fact that the Chancellor has seen fit to set up a committee shows he is also aware of that fact.
My second proposition is that the effect of that over-taxation has been to weaken the capacity of industry to undertake the tasks we desire it to undertake if this country is to survive. My evidence in support of that contention is the figures,

to which I referred in the Debate on an earlier Clause, given by Mr. Chambers of "Lloyds Bank Review," in an article in which he suggests that for 1947 depreciation reserves set aside were £600 million, whereas if adequate sums had been set aside to maintain the productive capacity of industry, that figure should have been £1,000 million—a deficit of £400 million.
With regard to 1948, I would only refer to the opinion of the President of the Federation of British Industries, whose contention was that out of net profits of something like £580 million, after taxation had been deducted, about £300 million were required in order to maintain the productive capacity of industry. My second proposition is also borne out by the fact that the effect of this taxation has been to draw upon what really should be the free reserves of industry available for expansion and other general purposes.
If those two proposition are conceded, some remedy is required in order to redress that wrong in the interests of our economy. With regard to the efficacy of the Chancellor's proposals for simply doubling the initial allowance, I concede at once that that is of some assistance, but it does nothing to provide any cash. I am told that the first benefit will be felt something like 15 months after the expenditure has been incurred. It is, in effect, simply a re-arrangement of existing allowances, and therefore it does not meet my two points.
Something else is also necessary and that is why I have put forward this Clause. The advantages of the Clause are these. First, the annual amount in respect of which the taxpayer can get his replacement allowance is limited to one-twentieth of the 1945 value, and if values are now up three times or so, that reduces the proportion of the present day value. Therefore, it is not a very extravagant proposal. Secondly, the allowance is only given as the expenditure is incurred, and therefore it is a very powerful stimulus to modernisation and re-equipment, which we all desire. I have tried to compress my argument as much as possible. I apologise if it is not clear, and I suggest that the Clause is worth the very serious attention of the Committee.

Mr. Birch: I support what my hon. and learned Friend the Member for Wirrall (Mr. Selwyn Lloyd) has said. I very much regret that the Financial Secretary is not here to listen to the argument. When we were talking about the Profits Tax on retained profits, the question of the adequacy of existing reserves arose, and the right hon. Gentleman brushed the whole thing aside and it appeared that he did not appreciate the gravity of the problem or that the problem really existed. He reminded me very much of a speech he made the other day at Wisbech. He said:
Some people are looking at the losses sustained by the nationalised industries and wondering whether Socialism is all its exponents claimed for it.
He posed that question, and he gave the answer he always gives us. He said:
I am quite sure the short answer is that we do not know.
He gave me the impression that the short answer is that he did not know anything about the subject at all. That is a pity, because it is the most important thing we have to face today.
I cannot rival my hon. and learned Friend in his very clear exposition of the details of this matter. What I want to do is to consider the reason which has led him to bring the Clause forward and what is going on about the profits of industry. The President of the Society of Incorporated Accountants made a very interesting speech the other day in which he said:
The colossal rise in the price level means that much of the value of the savings of the past has been destroyed.
That is true. Depreciation in this country is reckoned on what is known as the historical cost basis; that is to say, that what one originally paid for a piece of plant or machinery determines how much depreciation one is allowed to write off, and in no case can one write off more than that original cost.
3.15 a.m.
To illustrate what that means in a period of very rapid rises in prices, I shall give two examples. One is from the report of the Cunard Steamship Company. The Cunard stated that a liner bought in 1925 at a cost of £167,000 would today cost £625,000 to replace, whereas they only could set aside £167,000 towards that sum. The other

example is Unilever, whose fixed assets are £82 million which would cost £148 million to replace. It has been reckoned that if one takes the average in industry as a whole, for every £1 for wear and tear allowance £3 in earnings is required to counter the rise in the price level alone. The really important point is that as one is not allowed to depreciate that historical cost, which is no longer related to the prices of the machinery to be replaced, the profits which are shown are not true profits. They are very much higher, and with the very heavy taxation demanded today, the profits are not really there at all.
That was very clearly shown in France where inflation has gone further and more rapidly than it has in this country. In France they were forced to deal with the situation, and they dealt with inflation by writing up parts and machinery to something like their present value. They had a system of co-efficients by which machinery was written up by ratio. Before that writing up, there were, companies showing perfectly good profits and paying taxes. When the assets were written up and depreciated to their real value many companies were shown to be running at a loss instead of a profit. Although we have not got quite as far yet in this country, that is the background of what is going on here. The Chancellor of the Exchequer when dealing with this matter in his Budget speech cut his ethical corners rather finer than was suspected. He did not point out there were no true profits at all, and no one is in a better position than he to know the true facts.
This new Clause will do something to assist in the provision of plant and machinery but, of course, it does nothing at all with the question of non-circulating capital and keeping stocks intact. That is a problem of frightful intricacy, but the Clause does something to help on fixed assets. Hon. Gentlemen will note that we have not departed from the historical cost basis. We have not gone on to the replacement cost basis. We may have to do that yet, but I think it would be a terrible admission of defeat if we did it now, because we have run our affairs in this country on the basis that we could, somehow or another, maintain a reasonable price level based on the historical cost basis of accounting on prices which


obtained generally during the 19th Century. Allowing for the inflationary period after the Second World War, we have got stable prices, but we shall not maintain them if the present size of the Budget continues. If the Government act with reason some remedy of the sort suggested here may be sufficient, but unless they do something of the sort, industry will be drained of all liquid assets. Mr. Chambers has pointed out that, apart from some favoured industries in the depressed areas, physical capital is not being kept intact, and therefore I strongly support by hon. and learned Friend in this new Clause.

Mr. Jay: The object of the new Clause is to meet a special difficulty which arises out of what the hon. Member for Flint (Mr. Birch) called the historical cost basis of the depreciation allowance in a period when costs and prices have admittedly been rising. We are entirely at one with both hon. Members in the wish to encourage the modernisation of industry, and our acceptance of the need for some special remedy for the situation of rising costs is shown by our own proposal to double the initial allowance, which is a substantial relief in this direction. The hon. and learned Member wishes in this Clause to go substantially further, and to give considerable additional benefit.
There are three views on this point. There is a school of thought which think we have by this concession gone too far already. The hon. Member for Reading (Mr. Mikardo), in one of the earlier debates, argued that whereas industry has had to pay more for machinery and plant in the last couple of years compared with before the war, nevertheless it is selling its products at much higher prices and earning higher profits from which these replacements may be made. There is some force in that argument. I do not think there is sufficient force to invalidate the case for doubling the initial allowance, but there is sufficient force in it to make one pause before going further.
It was a very nice question just when was the right year to raise the initial allowance. If we had done it a year ago we should have acted too soon, because by and large it was not lack of finance which was limiting physical investment in industry. If we had waited another year we should probably have waited too long. In our view this year was the right year

to do it. One of my hon. Friends quoted "The Economist" and said that doubling the initial allowance meant in effect making an interest-free loan to industry; and it is a considerable concession. We thought we had chosen the right time and gone far enough in this direction. But since the hon. Member has raised this point about the initial cost basis, may I say that raising the initial allowances has gone a long way to meet it.
The difficulty is that a machine which costs £1,000 when bought, perhaps, in 1939, costs £2,000 to replace today. It is of course the case that on the old basis of depreciation allowance, the firm in question will have been able to build up a fund on that machine amounting to £1,000. The difficulty arises through its being only £1,000 to replace a machine which today costs £2,000. Our scheme of an initial allowance of 40 per cent. in addition to the first annual allowance will, in the normal case, give an allowance of about 50 per cent. of the cost in the first year of the installation of the new machine. So that does mean, in effect, a £1,000 allowance. When the second initial allowance on a machine is taken into account on a further replacement, it will be found that the higher cost of the second replacement is also covered. For these reasons, although we sympathise with the general objective, we consider our proposal goes far enough to meet the difficulty, and that a case has not been made out for a further substantial relief.

Colonel Haughton: Before we pass on to another subject, will the Economic Secretary tell the Committee what the attitude of the Treasury is towards the redundancy scheme in connection with which the Board of Trade issues certificates. Contributions to these schemes were allowed as expenses upon a business. I understand that there has been a complete change of policy in regard to these redundancy schemes. It is important that we should know what the attitude of the Treasury is towards them, because in addition to the difficulty of these problems of replacement, and capital expenditure, on which there is this 40 per cent. allowance, what I think can never be stressed too much is that international competition is producing the necessity for a complete replacement.
Take for instance the textile finishing trades. There are new permanent finishes


coming on to the market in America. We know that permanent finishes on cotton are replacing our exports of linen. We ought to be told the attitude of the Treasury, because it is all part and parcel of these things. I have reason to believe that there has been a change of policy in regard to these redundancy schemes within the last year.

Mr. Jay: I can give the answer in due course, but I do not think this matter strictly arises out of the matter we are discussing.

3.30 a.m.

Colonel Ropner: I hope that the Economic Secretary to the Treasury will not think I am being rude when I say that his speech gave me the impression that the hon. Gentleman knew absolutely nothing about the state of the trade and industry of this country. The fact remains that plant and machinery are not being replaced as they should be. The hon. Gentleman must appreciate that there is industry in this country—and I know something about one or two trades—which is up against foreign competition and foreign competitors who do not have to bear anything like the burden of taxation borne by industrialists in this country today. Unless some concessions are made—and made fairly soon—the output of trade and industry is bound to suffer because of unfair competition from abroad.
I hope that it may be possible to accept this Clause, but I do warn the Government that something will have to be done pretty soon. Attention has been called tonight to the fact that so-called "profits" were not really profits at all. Figures given present a very false impression of what is really happening, and I beg the Government to consider what relief can be given to trade and industry.

Mr. Renton: I know perhaps less about this matter than the Economic Secretary and certainly less than some of my hon. Friends. But, surely the position is that several factors have coincided to make it increasingly difficult for industry to modernise, re-equip, and replace capital equipment. The three factors are high costs, including the effect of the Purchase Tax, high taxation, and various other high charges, both capital and current. The fact that these factors do exist is recognised by the Government,

who wisely have doubled the initial allowance from 20 to 40 per cent.; but that is not enough for industry to capitalise itself to keep out the competition we are to expect from the world.
A number of constructive suggestions have been put down. This, I think, is the fourth this evening, and all have been turned down, one after the other. The Government seem to think that to have doubled the initial allowance is sufficient, but they will have to think again, and think quickly. If industry finds it difficult in the next 12 months to find the capital which is so obviously necessary, then we shall fall short of the requirements we expect of industry. I do ask the Government to consider one of these proposals, and preferably this one. The absence of the Chancellor tonight has been most regrettable, although I know that it cannot be helped. Of the constructive suggestions put forward, this, from a tax collection point of view, has the greatest advantage because the Government are sacrificing nothing in the long run. There is to be a spread-over of liability over the years. I have no hesitation in asking the right hon. Gentleman to pursue this matter further.

Sir W. Wakefield: I must rise to say that seldom has this Committee had to listen to a more unsatisfactory reply than that made by the Economy Secretary just now. He said that a case had not been made out but, if ever a case for something to be done was made out, it was the case made out by my hon. Friends tonight. The Economic Secretary suggested that because of the increased initial allowance higher profits can now be made, and that there was no need for industry to be helped in the way suggested by the Clause. Such a reply shows that he completely and utterly misunderstands the situation in which industry finds itself.
Let us take an example. Imagine a company with £100,000 worth of machinery and equipment and let us presume that that machinery and equipment over the years has to be renewed and modernised. It is true that the increased initial allowance enables that £100,000 worth to be replaced more easily now, but that £100,000 worth will now cost £200,000 to replace. Therefore a further £100,000 worth of new money is required to finance the re-equipment of the former machinery. Where is that coming from? It can only come from new capital or else


out of the reserve—out of profits made. Suppose a company in pre-war days made 10 per cent. on that £100,000, say £10,000 profit after depreciation. Some £2,000 would have gone in tax. Let us presume that those profits have now been increased by 50 per cent., which is more than is happening through the country today where the general level is 35 per cent; there is £15,000 profit. What is happening to that? Some 60 per cent. or more goes in taxation and leaves about £6,000 or £7,000 to pay dividends and other things. It will take 50 years or more to find the necessary fresh capital if it is done out of reserves.
That is the position in which industry finds itself today. I hope that by giving this example, I have illustrated how the Economic Secretary clearly has not understood the position. Obviously something has to be done, whether on the lines suggested in the Clause or some other way. It is clear that industry has been over-taxed and that some arrangement is needed. I hope we have not heard the final word on this matter. I deplore the absence of the Chancellor of the Exchequer. We know he has to be abroad but it seems to me that the business of this Committee could properly have been rearranged so that when matters of such great importance to the future industrial life of the country are under discussion, he could be here to hear our representations.

Mr. O. Poole: It seems to me that the point which has been made in this Debate, that this is the problem which now confronts industry, has been accepted on all sides of the Committee. It was in fact accepted by the Chancellor when he doubled the initial allowance in an earlier Clause. This matter is giving great concern to industry and, as has been pointed out, it will become more urgent. It is not, as the hon. Member for Oldham (Mr. Hale) said, a matter of crying "woe" or stinking fish but of what industry should rightly do. In times when profit has been made, it should look into the future and protect itself against the more difficult times that we all agree are coming. There is no doubt whatever, and I think this must be agreed by everyone concerned with industry, that this problem is really one of the most serious and most difficult facing industry at this time.
I do not think that it matters in the least at what time of the day this Debate is taking place. It is a matter with which this Committee should concern itself, however inconvenient the time may be. The reason why it is so difficult is that the scheme of doubling the initial allowance which the Chancellor has introduced in this financial year does create a great number of anomalies and of unfairnesses between different firms in the same industry and between different types of industry. That is why I support so strongly this new Clause. I think it will go a long way, although by no means all the way, as he himself would agree, toward ironing out those anomalies.
I hope that the Government will take into serious account the views that have been put forward from this side of the Committee. Too much emphasis cannot be placed at this time on the problem of this replacement allowance. It would be quite wrong for hon. Members on either side to pretend that it is a matter that can be easily solved. It is a matter which accountants and people of great experience in industry have gone into with great care, and I urge the Economic Secretary, even if he finds it necessary to ask for the new Clause to be withdrawn, to consider this scheme very carefully before the Report stage.

Mr. Stanley: I had anticipated that it was likely that the Economic Secretary might criticise the actual form of the Clause, and that he would agree that there was a real problem here which had not yet been met even by that welcome concession which the Chancellor has made in this financial year. I do not want to repeat or expand the examples which have been given, but as the Committee will realise, industry in this matter is facing a wholly peculiar problem. In our economic history, it is only after a great war, or during a great war, that replacement values have risen as high, as steeply, and as fast as they have during the past decade; and it is the steepness and the rapidity of the rise which has really thrown out of gear the old machinery for dealing with depreciation and created a situation in which new and critical measures must be taken.
3.45 a.m.
Had the hon. Gentleman given an indication that although he disagreed with this particular remedy he would be prepared to look at this alternative, or that


if this Clause was ill-drafted he would be prepared to consider a better draft, I should have been prepared to advise my hon. and learned Friend to withdraw the Clause and to await the further consideration of the Economic Secretary, but he has given no such help. He has not, in fact, criticised this Clause at all. He has given nothing to show that it is in any way impracticable. He has given no figures as to the cost to the Revenue. His only argument has been, "We have done something, and that something is enough." We do not think it is enough.
In no petty spirit we are grateful to the Chancellor of the Exchequer for what he has done, but the common object which we have is of supreme importance, and if the proposal of the Chancellor does not in our opinion go far enough it is our duty to try to supplement it. In the circumstances, although I should have been prepared to accept criticism of the drafting of the Clause, unless we get a further statement from the Economic Secretary in regard not only to his determination to press this particular remedy but to emphasise to the Government that in the situation which industry

is now facing some further remedy is necessary and urgent, I feel that I should advise my hon. Friends to press the matter.

Mr. Baldwin: So far, hon. Members on this side have put only the industrial point of view. In order to show that the shortage of capital is not only peculiar to industry. I want to emphasise the agricultural point of view. If the Chancellor of the Exchequer is in any doubt, he has only to refer to statements on various occasions by the Chairmen of Joint Stock Banks about overdrafts to the agricultural industry. With the increased wages and heavy expenses to which the industry is put in harvesting crops which sometimes take 12 months before they can be reaped, enormous amounts of capital are swamped and could be better used for extending the industry. I hope the Chancellor of the Exchequer will look at the matter again, and see whether he can do something for the industry.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 84; Noes, 201.

Division No. 193.]
AYES
[3.50 a.m.


Agnew, Cmdr. P. G.
Galbraith, T. G. D. (Hillhead)
Nicholson, G.


Amory, D. Heathcoat
Gates, Maj. E. E.
Noble, Comdr. A. H. P.


Assheton, Rt. Hon. R.
Gomme-Duncan, Col. A.
Nutting, Anthony


Astor, Hon. M.
Hare, Hon. J. H. (Woodbridge)
Odey, G. W.


Baldwin, A. E.
Harris, F. W. (Croydon, N.)
Pickthorn, K.


Beamish, Maj. T. V. H.
Haughton, S. G.
Poole, O. B. S. (Oswestry)


Birch, Nigel
Henderson, John (Cathcart)
Raikes, H. V.


Boles, Lt.-Col. D. C. (Wells)
Hinchingbrooke, Viscount
Rayner, Brig. R.


Bowen, R.
Hollis, M. C.
Renton, D.


Boyd-Carpenter, J. A.
Hope, Lord J.
Roberts, Emrys (Marioneth)


Braithwaite, Lt.-Comdr. J. G.
Hudson, Rt. Hon. R. S. (Southport)
Ropner, Col. L.


Buchan-Hepburn, P. G. T.
Hutchison, Lt.-Cm. Clark (E'b'rgh W.)
Spearman, A. C. M.


Carson, E.
Hutchison, Col. J. R. (Glasgow, C.)
Stanley, Rt. Hon. O.


Channon, H.
Langford-Holt, J.
Strauss, Henry (English Universities)


Clarke, Col. R. S.
Legge-Bourke, Maj. E. A. H.
Stuart, Rt. Hon. J. (Moray)


Conant, Maj. R. J. E.
Lindsay, M. (Solihull)
Taylor, C. S. (Eastbourne)


Corbett, Lieut.-Col. U. (Ludlow)
Linstead, H. N.
Teeling, William


Crookshank, Capt. Rt. Hon. H. F. C.
Lloyd, Selwyn (Wirral)
Thomas, J. P. L. (Hereford)


Crosthwaite-Eyre, Col. O. E.
Low, A. R. W.
Thornton-Kemsley, C. N.


Crowder, Capt. John E.
Lucas, Major Sir J.
Thorp, Brigadier R. A. F.


Cuthbert, W. N.
Lucas-Tooth, Sir H.
Turton, R. H.


Dodds-Parker, A. D.
McFarlane, C. S.
Wadsworth, G.


Drewe, C.
Mackeson, Brig. H. R.
Wakefield, Sir W. W.


Eccles, D. M.
Macmillan, Rt. Hn. Harold (Bromley)
Ward, Hon. G. R.


Foster, J. G. (Northwich)
Macpherson, N. (Dumfries)
Williams, C. (Torquay)


Fox, Sir G.
Maitland, Comdr. J. W.
York, C.


Fraser, H. C. P. (Stone)
Maude, J. C.
TELLERS FOR THE AYES:


Fraser, Sir I. (Lonsdale)
Mellor, Sir J.
Colonel Wheatley and


Galbraith, Cmdr. T. D. (Pollok)
Neven-Spence, Sir B.
Mr. Wingfield Digby.




NOES


Adams, Richard (Balham)
Barton, C.
Blackburn, A. R.


Albu, A. H.
Bechervaise, A. E.
Blyton, W. R.


Attewell, H. C.
Berry, H.
Bowden, Fig. Offr. H. W.


Awbery, S. S.
Beswick, F.
Braddock, Mrs. E. M. (L'pl. Exch'ge)


Bacon, Miss A.
Bing, G. H. C.
Braddock, T. (Mitcham)


Baird, J.
Binns, J.
Brook, D. (Halifax)




Broughton, Dr. A. D. D.
Haworth, J.
Pryde, D. J.


Brown, George (Belper)
Henderson, Joseph (Ardwick)
Randall, H. E.


Brown, T. J. (Ince)
Herbison, Miss M.
Ranger, J.


Bruce, Maj. D. W. T.
Hewitson, Capt. M.
Reid, T. (Swindon)


Burden, T. W.
Hobson, C. R.
Rhodes, H.


Burke, W. A.
Holman, P.
Ridealgh, Mrs. M.


Butler, H. W. (Hackney, S.)
Horabin, T. L.
Robens, A.


Callaghan, James
Houghton, A. L. N. D.
Robinson, Kenneth (St. Pancras, N.)


Castle, Mrs. B. A.
Hoy, J.
Rogers, G. H. R.


Chamberlain, R. A.
Hubbard, T.
Ross, William (Kilmarnock)


Champion, A. J.
Hudson, J. H. (Ealing, W.)
Royle, C.


Chetwynd, G. R.
Hughes, Emrys (S. Ayr)
Sargood, R.


Cocks, F. S.
Hughes, Hector (Aberdeen, N.)
Shackleton, E. A. A.


Collindridge, F.
Hughes, H. D. (W'lverh'ton, W.)
Sharp, Granville


Collins, V. J.
Hynd, H. (Hackney, C.)
Shurmer, P.


Comyns, Dr. L.
Hynd, J. B. (Attercliffe)
Silkin, Rt. Hon. L.


Cock, T. F.
Irving, W. J. (Tottenham, N.)
Silverman, J. (Endington)


Corbet, Mrs. F. K. (Camb'well, N. W.)
Jay, D. P. T.
Silverman, S. S. (Nelson)


Crossman, R. H. S.
Jeger, G. (Winchester)
Simmons, C. J.


Cullen, Mrs.
Jones, D. T. (Hartlepool)
Skinnard, F. W.


Daines, P.
Jones, Elwyn (Plaistow)
Smith, C. (Colchester)


Dalton, Rt. Hon. H.
Jones, J. H. (Bolton)
Smith, S. H. (Hull, S. W.)


Davies, Edward (Burslem)
Keenan, W.
Sorensen, R. W.


Davies, Ernest (Enfield)
Kinley, J.
Soskice, Rt. Hon. Sir Frank


Davies, Harold (Leek)
Lang, G.
Stokes, R. R.


Davies, Haydn (St. Pancras, S. W.)
Lavers, S.
Stross, Dr. B.


Deer, G.
Lee, Miss J. (Cannock)
Stubbs, A. E.


Delargy, H. J.
Levy, B. W.
Symonds, A. L.


Diamond, J.
Logan, D. G.
Taylor, R. J. (Morpeth)


Dobbie, W.
Longden, F.
Thomas, D. E. (Aberdare)


Dodds, N. N.
McGhee, H. G.
Thomas, George (Cardiff)


Driberg, T. E. N.
Mack, J. D.
Thomas, I. O. (Wrekin)


Dye, S.
McKay, J. (Wallsend)
Tolley, L.


Ede, Rt. Hon. J. C.
Mackay, R. W. G. (Hull, N. W.)
Ungoed-Thomas, L.


Edwards, W. J. (Whitechapel)
McKinlay, A. S.
Vernon, Maj. W. F.


Evans, Albert (Islington, W.)
McLeavy, F.
Wallace, G. D. (Chislehurst)


Evans, John (Ogmore)
Macpherson, T. (Romford)
Wallace, H. W. (Walthamstow, E.)


Evans, S. N. (Wednesbury)
Mallalieu, J. P. W. (Huddersfield)
Warbey, W. N.


Ewart, R.
Mann, Mrs. J.
Watkins, T. E.


Fairhurst, F.
Manning, C. (Camberwell, N.)
Webb, M. (Bradford, C.)


Farthing, W. J.
Mellish, R. J.
Weitzman, D.


Fernyhough, E.
Middleton, Mrs. L.
Wells, P. L. (Faversham)


Fletcher, E. G. M. (Islington, E.)
Mikardo, Ian.
West, D. G.


Foot, M. M.
Millington, Wing-Comdr. E. R.
Wheatley, Rt. Hon. John (Edinb'gh, E.)


Forman, J. C.
Mitchison, G. R.
Whiteley, Rt. Hon. W.


Fraser, T. (Hamilton)
Monslow, W.
Wigg, George


Freeman, J. (Watford)
Morris, Lt.-Col. H. (Sheffield, C.)
Wilcock, Group-Capt. C. A. B.


Freeman, Peter (Newport)
Morris, P. (Swansea, W.)
Wilkes, L.


Ganley, Mrs. C. S.
Nally, W.
Willey, F. T. (Sunderland)


Gibson, C. W.
Neal, H. (Claycross)
Willey, O. G. (Cleveland)


Gitzean, A.
Nicholls, H. R. (Stratford)
Williams, J. L. (Kelvingrove)


Glanville, J. E. (Consett)
Noel-Baker, Capt. F. E. (Brentford)
Williams, Ronald (Wigan)


Gordon-Walker, P. C.
Orbach, M.
Williams, W. T. (Hammersmith, S.)


Griffiths, D. (Rother Valley)
Paget, R. T.
Williams, W. R. (Heston)


Guest, Dr. L. Haden
Paling, Will T. (Dewsbury)
Willis, E.


Gunter, R. J.
Palmer, A. M. F.
Wills, Mrs. E. A.


Guy, W. H.
Pargiter, G. A.
Wyatt, W.


Haire, John E. (Wycombe)
Parkin, B. T.
Yates, V. F.


Hale, Leslie
Peart, T. F.
Younger, Hon. Kenneth


Hall, Rt. Hon. Glenvil
Popplewell, E.



Hamilton, Lieut.-Col. R.
Price, M. Philips
TELLERS FOR THE NOES:


Hannan, W. (Maryhill)
Proctor, W. T.
Mr. Pearson and Mr. Snow.

New Clause.—(INCOME TAX ARREARS CANCELLATION.)

If an individual who receives a demand for arrears of income tax in respect of any year prior to the financial year commencing on the fifth day of April, nineteen hundred and forty-five, proves that during the relevant period he was serving in His Majesty's Forces, he shall be entitled to claim that such arrears be disregarded up to the amount of seventy-five pounds.—[Lieut.-Commander Braithwaite.]

Brought up, and read the First time.

Lieut.-Commander Braithwaite: I beg to move, "That the Clause be read a Second time."
May I commence by disclosing that, should this new Clause be accepted by the Committee and made retrospective, I stand to gain £35. Hon Members must take that fact into consideration in listening to the argument I am about to advance. This matter has been raised on many occasions during recent months by Questions and in an Adjournment Debate initiated by the hon. Member for Streatham (Sir D. Robertson), who asked me to express his regret at being unable to be present owing to bad health; the doctor will not permit him to take part


in these barbaric exercises in the middle of the night.
Here is an issue which is simple and easy to understand, in no way technical, and for which I do not need to draw on any documentary inspiration of any kind. Every hon. Member is familiar with the problem that three or four years after demobilisation certain Members of His Majesty's Forces are being confronted with Income Tax demands not based on the current year but going back in some cases so far as 1939–40. In my case they went back to 1941–42 and 1942–43. On demobilisation in 1945, and in some cases later, these gentlemen were entitled to assume that they were leaving the Service in a condition known colloquially as "having their noses clean," but they find that after an interval of two or three year there descends upon them, in many cases from the Departmental Claims Branch, Cardiff, demands for amounts of arrears frequently going up to figures as high as £80 to £100.
In many cases the circumstances of these gentlemen have altered very seriously for the worse, so far as their current remuneration is concerned. We all know how the war often altered circumstances. Men who in civilian life were in subordinate positions, through a flair for leadership reached high ranks in the Service, in which they served with distinction and drew four-figure salaries, and at the end of it they have found themselves reverting to civil life where their circumstances may be very different. To be confronted with Income Tax demands at this time of day comes as a grievous shock to those who receive them. Following the Adjournment Debate which we had on this matter, in which I said a few words, I was surprised at the number of letters I received from all parts of the country showing that these are not isolated instances but that it is a matter of widespread grievance.
4.0 a.m.
The issue is so plain that it can be introduced in these very few words. I have only two comments to make. The first is that these mistakes are the mistakes of His Majesty's Government in the first instance. Whoever was responsible for keeping the accounts—accountant officers on board ship, regimental paymasters or Air Force accountants—

should by 1945 and 1946 have cleaned up the Income Tax position for financial years going back to 1940–41. These people left the Services in the belief that their Income Tax liabilities were cleaned up and finished.
My second comment concerns the method by which repayment has been made and settled. In cases where these gentlemen have found themselves confronted with demands for £30 or £40, they have frequently been accompanied by cancelled post-war credit certificates and notification that they had been set off against the debt. That is an extraordinary procedure. On this Committee stage we have not been able to discuss post-war credits as a whole and their further release, but the Government have established the formula "So long as you remain solvent you have no chance of drawing your post-war credits until, if a male, you reach 65 or, if a female, 60, but if you get into debt to His Majesty's Government, you get your post-war credits right away, cancelled." That is penalising the solvent and giving a bonus to those who get into debt, which is a totally improper procedure to adopt.
On the broad issue, the Clause suggests that, in view of the Government's delay in making these claims, the proper and decent thing to do now is to wipe the slate and remove a great anxiety and burden from these gallant Gentlemen now in civilian life.

Colonel Gomme-Duncan: I support what has been said by my hon. and gallant Friend the Member for Holderness (Lieut.-Comdr. Braithwaite). I am fully aware that people in the Services are usually fairly light-hearted about financial matters—certainly when they are on active service they have not very much chance of being anything else, because in the desert, on the sea or in the air in various parts of the world finance does not seem to matter very much—but I am aware that, strictly speaking, those of us in that position should still be looking after our financial affairs. Everyone is responsible for his own financial affairs, but in the cases which have been put so clearly by my hon. and gallant Friend, the Government Department is really at fault and it is not fair to say, as is sometimes said, that it is the duty of the individual to keep a check on his own


affairs. That is, of course, the duty, but these were exceptional circumstances, particularly where men were serving abroad.
The Government's answer will probably be that there are others who should also be considered in this way, but I do not think that, because there are others, the people of whom we are thinking should be denied this act of justice. Even if all the other people who may be in a similar position cannot be dealt with, I hope that we may make a start at least with ex-Service men, who deserve it of their country.

Mr. S. Silverman: I should like to say a word in support of this Clause and to make an appeal to my right hon. Friend to accept it. I would not do it on the ground just put to the Committee, that there are many other cases and that if we cannot deal with all of them at least we should deal with this one. I would rather put it, as the Mover of the Clause put it, on the ground that this is a special case which we would do well to consider by itself, and not in relation to any other cases of mistakes which ought, or ought not, to be rectified. I think it is a little shabby that four, five or six years after a man has ceased his service he should be faced with a demand for Income Tax which he would cheerfully have met if it had been claimed at the time when it was due on the income he was then earning, but which he has long forgotten, has no means of checking, or even finds it now impossible to pay.
In normal life, of course, the responsibility for sending any return of income on which Income Tax is assessed rests with the taxpayer, and rightly so; but in these cases it does not, and could not, in the nature of things rest with the taxpayer. It is all very well to say that he is a party to the mistake, but I do not think that is so. At the time the man was not thinking about these matters, he had other things to do than to go through his accounts with a fine-tooth comb. If a claim is to be made, it obviously should have been made by the authorities at the time when it fell due. If for no other reason than that the claim is not made under a substantial period afterwards, it is shabby to insist on it now.
It is only in the case of a Crown debt of this kind that the ordinary Statute of Limitations does not apply. If the debt

had arisen in other circumstances, the man would be perfectly entitled to say that this was too long ago. While I would not make that kind of claim as regards Income Tax debts as a general rule, or in the ordinary case, I think that in these special classes of cases the Treasury might very well give up, as a gesture of good will, claims that cannot amount to very much and which are nothing but an irritation to people when they are made after such a long delay.

Sir I. Fraser: There is a group of ex-Service men who served in Burma and whose pay was miscalculated by the local accountants, some of them Burmese and Indians, and these people were for a year or two overpaid. When they came back from service, perhaps from prison camps, they found claims laid against them which they could not possibly pay back. In many cases the War Office has written them off, in many instances to the extent of £30, £40 or £50. That was the decent thing to do. Can that not be a precedent for the Treasury in these cases? These claims are due to an error. I am absolutely convinced that any private firm which had a young employee who went away to the war and might have left behind him a debt of £30 or £40—even if he knew it, and it was his mistake—would not hold it against him on his return. If it were the firm's fault, and not his, how much more would it be willing to cancel it. I hope that the right hon. Gentleman will do something in this case.

Mr. Houghton: I wonder whether I might venture to give the Committee a few reasons why I submit there will be difficulty in accepting this new Clause. In the first place, it introduces an entirely new principle into the payment of tax in that it is proposed to cancel arrears of tax by reference to a limit on amount and by reference to military service during the war, and without regard to the circumstances of the individual taxpayer, his ability to pay, or indeed his willingness to pay. I submit also that not all these arrears relate to tax on Service pay. The hon. and gallant Member who moved the Clause referred to some arrears which go back as far as 1939–40. Many are arrears of tax on civilian earnings or profits, left unpaid when the taxpayer joined the Forces. They were held in suspense dur-


ing military service, and the bill was presented when the man came back, or as soon after as the necessary process could be gone through to discover his whereabouts.

Lieut.-Commander Braithwaite: That is not what I had in mind. The claim I mentioned was a definite one from the Departmental Claims Branch, and arose out of service in the Royal Navy.

Mr. Houghton: I accept that, but the new Clause does not distinguish between tax arrears on Service pay and tax arrears held in suspense.

Mr. Emrys Roberts: The hon. Member is wrong in saying they were held in suspense. My experience was that the authorities dragged up these arrears and insisted on a man paying them while he was in the Forces.

Mr. Houghton: I am not quite wrong. I am secretary of a large body of Income Tax officials and I am very close to this problem. I know that during the war, for a variety of reasons, tax which was due on pre-war earnings was held in suspense while a person was in the Forces. I can assure the Committee that instructions were issued to collectors of taxes that no pressure was to be brought on a person in the Forces who had left behind arrears of tax on civilian earnings or profits.
I concede at once that these arrears are not the main content of this problem, which is arrears of tax on Service pay. The difficulty of keeping in touch with the pay and location of members of the Forces during the war led to this difficulty. It may have been a mistake, and in my opinion probably was, that Income Tax was levied on Service pay at all during the war, having regard to the wide-flung theatres of war and sudden changes in rank and pay, with corresponding changes in Income Tax liability. At one stage during the war there were 46,000 officers in the R.A.F. whose names—let alone rank and pay—were not known to the Inland Revenue Department. The taxation machine relied entirely on being kept in touch by the Defence Departments with the names, rank and pay of the officers concerned, leading to great complications of administration because of the frequent changes. These officers and other ranks were

demobilised in large numbers at the end of the war, thrusting a heavy burden on the Inland Revenue to sort out their tax affairs and tell them how much money they owed. We have not heard of the many cases in which there was a repayment due, which is being made.
The Committee must consider the important question of equity between one taxpayer and another. Many of these taxpayers have been able and willing to pay the arrears, and have done so. Others have reached accommodation with the authorities for the gradual discharge of this liability as part of their current Income Tax. If this new Clause is carried, all these payments will have to be gone over again, all these arrangements will have to be cancelled, and that notwithstanding that in many cases the persons concerned are able to pay. Not in all cases have their circumstances altered unfavourably since the war.

4.15 a.m.

Mr. S. Silverman: Will the hon. Member say how far he would go. Does he think there ought not to be any time limit?

Mr. Houghton: Generally a time limit is observed in the recovery of arrears, which is longer by a year or two than the period which has so far elapsed between the arrears and the demand for payment. We all regret the circumstances in which these arrears are now demanded, and the inconvenience created—and indeed, the possible hardship created—in many cases where payment of these arrears is being demanded; but I submit to the Committee that it will create as many grievances as it will remove if we adopt the new Clause, and that it will introduce an undesirable principle into the system of taxation if we agree to wipe the slate clean irrespective of the circumstances of individuals, of the circumstances in which those arrears arose, and of the ability of the individual to pay.

Mr. Maude: Before the hon. Member sits down, perhaps lie will correct one thing. Unwittingly he misled the Committee. He said that the new Clause did not take into account the willingness of a man or woman to pay. That is wrong. All that the new Clause does is to entitle a person to claim.

Mr. Houghton: If I may say so, that is indeed an invidious choice.

Mr. Langford-Holt: I do not wish to delay the Committee very long. The hon. Member for Sowerby (Mr. Houghton) said that the proposal would mean an entirely new departure. I suggest to him that war, in itself, is a trifle unusual, and we trust that it will remain so. It has uprooted men completely from their previous surroundings and placed them in other circumstances and in other parts of the world. Therefore, we are considering here a case which cannot be considered side by side with the ordinary run of taxation. The question arises whether these men can be considered to have been a party to the mistake which has been made. It is true to say, I think, that the civilian, by and large, carries out his own Income Tax affairs. That is not true of the Service man. I wonder whether hon. Members have considered the position of a man who has to go to the paymaster, or whoever is working out the system, and argue about his tax assessment. He would not get very far. Virtually, it is impossible for the soldier, sailor or airman to question at any time his Income Tax deductions.
The one point I would like to make is that there is an analogy between this case and cases of overpayment. Where an overpayment is made by a Service Department and it is subsequently pointed out, at this stage after the war the claim is not pressed, certainly not in the case of other ranks, though it is, and can be—I do not know why—in the case of officers. In the case of soldiers, sailors and airmen the claim is not pressed. That shows that the Government accept the moral argument which is being put forward here. I make just these two points; first, that the man is not party to the mistake, which must be laid at the door of the Government, which took on the responsibility for deducting this tax, and secondly, as a result, the Government should accept the mistake in the assessment.

Mr. Jay: Hon. Members have put a very forcible case, and their proposal is one which must have an initial appeal to all of us. I think that my hon. Friend the Member for Nelson and Colne (Mr. Silverman) did make a case for special treatment, and implied that we are justified in these cases of ex-Service men's

arrears in taking special care to spread out the collection over as long a period as possible in relation to the ability of the person to pay—in some cases, over very long periods indeed. That is being done, and special care is being taken; but when we go beyond that and examine the proposal contained in this Clause, I am afraid we do run into difficulties of equity between one taxpayer and another which my hon. Friend the Member for Sowerby (Mr. Houghton) set out to the Committee.
Even if we do not put too much emphasis on the principle that a tax should be written off, there is the additional difficulty that, in this proposal there is no reference to the taxpayer's ability to pay, or his needs at present. There would be the anomaly of a concession to some individual whose present income might be quite considerable, and whose earnings in the Services might have been considerable.
In addition, there is the even greater difficulty, which my hon. Friend mentioned, that a great number of these taxpayers who have incurred these arrears, have, in fact, paid them already since the war ended. A very awkward question of equity would arise as between those to whom the concession was made, and those other ex-Service men who have already paid the tax. As a matter of justice, if the arrears were cancelled for those who have not paid, the Inland Revenue authorities would have to refund amounts paid since the end of the war by other ex-Service men. That would be a very large and difficult task indeed and, in our opinion, one which could not be administratively undertaken after this considerable lapse of time without far too great a strain on the Inland Revenue resources of manpower; one that is without mentioning loss of revenue.

Captain John Crowder: Can the hon. Gentleman tell us how many are involved?

Mr. Jay: If one went back to all those involved who have paid since 1945, there would be many thousands, perhaps tens of thousands, but I cannot give any figures.

Captain Crowder: Outstanding at the present moment?

Mr. Jay: I cannot give the exact figure now, but obviously the number who have paid since the end of the war and to whom repayment would have to be made would be very large.

Mr. Maude: What amount does the Economic Secretary consider is involved in this proposal in loss to the Revenue?

Mr. Jay: The amount which would be involved in wiping out arrears of those who have not yet paid would probably not be large, but I could not give the figure because it is not easy to estimate. The figure which would have to be repaid is very large, but I am not resting my case on the amount of loss to the Revenue. That is not a major factor. There is no doubt, and I think that my hon. Friend the Member for Sowerby would agree, that a very large volume of administrative work would be involved in making repayments.
In addition, there is the question whether it would be fair to confine a concession of this kind simply to ex-Service men who had incurred these arrears during the war. No doubt claims could be made for other people who had incurred such arrears during the war or at other times and who had been doing work of national importance. One would get into difficulties as between one class and another.
For all these reasons we think that the right course in fairness to all these different clases of taxpayers, both ex-Service men and those others who are faced with payments of arrears, is to continue the process of assessing and collecting the sums due and to take special care, as we are already doing, to adjust the rate of payment to the individual's present circumstances and needs. When all the complicated factors and balances are taken into account, we feel that this is, on the whole, the best and fairest course.

Mr. Hollis: I only want to make one point. The Economic Secretary rests his case on the fact that if this were granted there would have to be repayment of all payments that have been made by people who have served in the Forces. I happen to be in that class, having served in the Forces. The whole case is that it is exceptional hardship which is involved—the people who suddenly receive demands for which they had not calculated. If one were to receive a demand near the

time when one expected it, one would not dream of having a grievance or demanding repayment.

Mr. Paget: I hope the Economic Secretary will reconsider this matter as to people who have not had claims made against them yet, since it really is hard on them to receive claims after all these years. There comes a claim for what is a very considerable sum in the circumstances in which a man is living and which interferes with his arrangements and his way of living. It is a sudden charge from the years behind, and it causes great bitterness. Surely, this is a time when one could wipe the slate? We all know that, because the Income Tax authorities are under great strain and are understaffed, there are many people who are escaping very large sums of Income Tax which they ought to pay. I cannot believe that taking up these trifling claims of under £75 arising out of the war is really worth the administrative cost. Could we not say now that we will put an end to this? I think it would be quite unreasonable to allow people who have paid to reclaim, we do not want that but I think we should say now that we will not have any more of these claims. I hope the Financial Secretary will favourably consider this proposal.

4.30 a.m.

Mr. Boyd-Carpenter: I was very disappointed with the Economic Secretary's reply. I hope he will not think it offensive when I say that it was a conventional Ministerial answer on a matter in which the Government are not interested. He really should not put forward at 4.30 in the morning, the threadbare and thoroughly unworthy argument that because one cannot do justice to everybody, one should not try to do justice to anybody. It is true that there would be certain inequalities if this Clause were passed, but surely the commonsense view of the matter has been put by the hon. and learned Member for Northampton (Mr. Paget) that it is quite undignified and shabby for a great country to go grabbing after these small sums of money, almost all of which were not deducted at the time because of the error of some Government Department, and years afterwards to use the energy


of the overworked Inland Revenue staffs in trying to retrieve these small sums.
To say that he does not know what it would cost is not the way to treat an issue which means a great deal to a small number of very respectable citizens, every one of whom, ex hypothesi, has served his country. I was very surprised by the attitude of the Economic Secretary in view of the answer which the Financial Secretary gave across the Floor of the House as recently as Thursday last. The Financial Secretary will recall a particular case over which I have been in long correspondence with him. I will briefly outline the facts because it is an excellent example of the situation. It is the case of a man who was shot down over Germany while serving in a Lancaster bomber. Tax arrears accrued while he was a prisoner of war and obviously prohibited from taking any care of his affairs, but his widow made an effort at the time to secure that full tax deductions on his pay and her earnings were made.

Mr. Glenvil Hall: I am sure the hon. Gentleman would desire to get the facts right. So far as concerns the efforts of the man's widow to get tax deduction on his behalf that, I am informed, is not correct.

Mr. Boyd-Carpenter: The right hon. Gentleman says that. The lady is perfectly clear to the contrary, and is prepared to give a sworn statement to the right hon. Gentleman any time he desires. If he rests his objection on that particular point, which is not a major part of the case, I shall be happy to take up the point if he will undertake to reconsider this whole matter. Let me refer to the answer which the Financial Secretary gave me only a few days ago. In reply to a supplementary question of mine, the effect of which was to ask whether he could not reconsider the matter, he began with these words:
Unfortunately, I have not the authority to allow arrears of Income Tax to go unpaid.
It is precisely the effect of this new Clause to give to the right hon. Gentleman that authority which he himself said unfortunately he did not then possess. If the right hon. Gentleman was sincere—and I give him credit for that—in saying on Thursday last that it was unfortunate that he did not possess these

powers, it is a little ingenuous for him to sit silent at the moment when the Economic Secretary is urging the Committee not to give him these powers.

Mr. Glenvil Hall: Would the hon. Gentleman read my reply to a further supplementary question asked by the right hon. and gallant Member for the Scottish Universities (Lieut.-Colonel Elliot)?

Mr. Boyd-Carpenter: To oblige the right hon. Gentleman, of course. The right hon. Gentleman said in reply:
It can hardly be described as a moderate reform, but the point is, if people who owe arrears of tax do not pay, then those who have paid might feel it would be very unfair to them."—[OFFICIAL REPORT, 23rd June, 1949; Vol. 466, c. 51–2.]
I do not know why the right hon. Gentleman wanted me to read that. [HON. MEMBERS: "Oh!"] It expresses what the Economic Secretary said this morning, only it seems that the Economic Secretary put it much better. The Financial Secretary knows perfectly well that when he expressed the view that it was unfortunate that he did not possess the powers, he was not sincere. If he was, how can he oppose the new Clause?

Mr. Glenvil Hall: May I put the point by an example? As I understand it, the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) owes £35, and if this Clause is agreed to he will be £35 to the good.

Lieut.-Commander Braithwaite: Should this Clause be accepted and be made retrospective, I should benefit to the tune of £35. I have, in fact, made the payment and so should not benefit.

Mr. Glenvil Hall: I accept what the right hon. and gallant Gentleman says. Supposing he had not paid it, it would mean that he stood to gain to the tune of £35. One must treat all taxpayers alike—one cannot pick and choose. That is why I say that unfortunately—I repeat, unfortunately—I am positive that there would be some who would feel aggrieved, and ask why they should have had to pay their dues when others had not.

Captain Crookshank: We are in considerable difficulty about this matter, and it is somewhat unfortunate that the Economic Secretary should be dealing with it after the Financial Secretary to the Treasury had been concerned with it.


I should have preferred the matter to be referred to the Chancellor of the Exchequer, who, after all, has to take the final decision. Obviously the awkward point is that anything of this kind does to some extent break into the canon of taxation that all taxpayers have to be treated alike. That is a principle which has always been held and which it is important to hold.
On the other hand, there is the fact, which is not denied by Government spokesmen, that this matter has arisen only because of the difficulties of making assessments before. They obviously should have been made years ago, and the information given by the hon. Member for Sowerby (Mr. Houghton) that at one time, so far as he and his friends were concerned in the calculation of taxation, there were 46,000 officers of the Royal Air Force about whom they knew nothing, shows something of the complexities with which they were faced. In spite of that, gallant efforts were made. Now there remains an indeterminate amount. We have not been told either how many outstanding cases there are or what amounts are involved. From the point of view of those who get these demands, it can obviously be a very great hardship where their circumstances have changed. While the figure may not be large in a budgetary sense, it may make quite a lot of difference to a man who has served in the Army and who is now struggling in quite different circumstances.
I understood the Economic Secretary to say, "Oh, yes, we took that into account and we spread out the payments." Does that mean that, having made the claims for £50 or £60, that amount is to be spread over five or six years more? If so, these unfortunate people will begin to think there is no end to this trouble. If it is only a small sum, I agree with some hon. Members who have said that, whatever the canons of taxation and equity are in the matter, in the case of those who have already paid, I do not believe there would be any great sense of grievance amongst these people if nothing was done in this outstanding number of cases. I agree that the Treasury have to give some weight to the possibility that there will be an outcry from hundreds of thousands of people who have paid.
I should have thought that the real end of the story was that we ought to try to get out of this difficulty. Concern has been expressed on both sides of the Committee, and this is the first new Clause which has received such universal support. If the two Secretaries will say that they will put to the Chancellor, who could not possibly have foreseen the strength of feeling on this matter, the general view which has been put from all sides of the Committee, and consider whether in fact there would be such a great demand from people for remission of tax, and note that it is not necessary that the claims should be wiped out altogether, there should be ground for an agreement.
There are many people who might be able to pay when the nation's financial difficulties are so great and if so, they need not take any notice of this Clause, which only says they may make a claim. The best way out is for the two Secretaries to consult the Chancellor and give us an undertaking that they will be able to make a statement before the next stage of the Bill so that if, in the light of their preliminary consideration, we put down an Amendment on this topic, this matter can be discussed again. That might get us out of the trouble.

Mr. Glenvil Hall: I think the first observation of the right hon. and gallant Gentleman was right—that it would be dangerous to pass a Clause now or later of the kind on the Order Paper, for the good reasons he gave. There are certain canons of taxation, and one of them is that all taxpayers should be treated alike in like circumstances. What we have here is a matter which has aroused intense sympathy in all quarters of the Committee, and I think among all sections of the community, and it is something that we hope will not recur. It happened because of the war and limits have now been set to it. Obviously as time goes on, in one way and another, the matter will be settled.
It would be wrong for the Committee to try and legislate for this matter rather than to allow the matter to be dealt with administratively, as the Economic Secretary suggested. As he indicated, the Inland Revenue are now treating these cases with the utmost sympathy, but they cannot, under the law, wipe off tax except in certain circumstances, and when


these circumstances arise they have to be reported to the Comptroller and Auditor General. If there is any chance that the circumstances of an individual may improve, it is the Inland Revenue's duty under the law to try and collect tax provided they can keep it alive by demands and assessments. In practice, where the circumstances are such that it is obvious the money will never be collected, the Inland Revenue do not press the matter; but where the circumstances show that the money can be paid over a reasonable period, it is the duty of the Inland Revenue to try and get the individual to pay by easy instalments.
4.45 a.m.
A great deal of feeling has been aroused, but not all these cases are on all fours. In some cases the men have quite deliberately evaded the payment of tax due. In other cases, they did not pay because the Inland Revenue, owing to shortage of staff, were unable to trace them. It would be grossly unfair to treat all cases in the same way. We want to do justice by these people and settle this matter in some reasonable way. That can only be done administratively and case by case. I can assure the Committee that the Inland Revenue have every sympathy with these cases and are doing their best in the circumstances facing them to settle them without doing hardship to the men and their families. Of course, I will report to my right hon. and learned Friend what has transpired this morning, but I can assure the Committee that we have looked into this with the utmost care. I know my right hon. and learned Friend's view on this matter, and his decision is the one which my hon. Friend has conveyed to the Committee.

Mr. A. R. W. Low: When my hon. and gallant Friend introduced this new Clause, and indeed when the hon. Member for Nelson and Colne (Mr. S. Silverman) spoke, I understood that a very strong argument had been made to show that this was a very special case. Moreover, when the right hon. Gentleman answered the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) the other day, he said he was not able to deal with these special cases by administrative action. He is now telling us that he may be able to deal with every individual case—there are

thousands of them, I do not know how many and the right hon. Gentleman does not know either—by administrative action. This is very unsatisfactory, particularly after this Debate, in which it has been made clear to the Government Front Bench that this is a very special case of hardship.
I should preface my remarks by saying that I am one of those who have received claims, to a slightly larger amount than my hon. and gallant Friend. I think the Government spokesman will acquit me of having my own personal interest at the back of my mind in what I shall have to say. I should like to remind the right hon. Gentleman of the circumstances in which these arrears accrued. Officers and men serving overseas were in no position to check either the exact amount of their pay or the changes in the tax laws; but they did know that there was an obligation on the pay authorities to deduct tax at source, and when back pay was given as a result of promotion or changes in pay, every one of us serving overseas must have noticed that there was a great increase in the amount of tax deducted.
I remember noticing on a number of occasions what an enormous amount of tax seemed to have been deducted in a particular month. I understood from the inquiries which I made—a lot of other people made similar inquiries—that the pay authorities were trying to keep up month by month with the actual tax due and that if they fell behind at all, at the end of the year or from period to period they made greater tax deductions from the monthly pay. From that point of view, most officers and men who have recently received these claims for arrears were satisfied when they were demobilised that they had paid all the tax they owed and that their account was clear.
Hon. and right hon. Gentlemen opposite may have at the back of their minds that savings may have been made from time to time and that at any rate there was the gratuity with which demobilised men went into civilian life. If they have, they should also remember that those savings were used in many cases for establishing a home and cannot be called upon to answer the claims of the Inland Revenue, and that, therefore, there is great hardship. I speak not from my own


point of view but from that of many constituents and others about whom I know.
I beseech the right hon. Gentleman to speak again to the Chancellor, pointing out that there is strong feeling about this and a real case of hardship. If he feels some difficulty about the suggestion that claims put in, say, last year should be let off, let him at least answer the request of the hon. and learned Member for Northampton (Mr. Paget) that no more claims for arrears shall be sent to unsuspecting former officers and men of the fighting Services. Let us close this matter now and have no more of this treatment, which was rightly described by the hon. Member for Nelson and Colne (Mr. S. Silverman) as shabby treatment of ex-Service men. I put that request as strongly as I can, and I ask the Financial Secretary to speak again to the Chancellor and ask him to reverse his decision.

Mr. Stanley: I want to reinforce the plea made to the Financial Secretary. My right hon. and gallant Friend the Member for Gainsborough (Captain Crookshank) put his suggestion to the Financial Secretary very fairly. In the absence of the Chancellor, no one expects the Treasury representatives to give the Committee any firm commitment, and no one asks for that, but in view of the feeling in the Debate, the Committee—if the whole proceedings are not to become a farce—are entitled to ask that the course of the Debate and the feeling shown shall be reported to the Chancellor of the Exchequer. I was disappointed when the Financial Secretary said that the matter had been talked over, the Chancellor had made his decision and it was no good telling him anything more. When he thinks that over, he will realise that that is not really treating the Committee properly, because although a provisional decision may have been made, it is possible that a report of the opinion of the Committee may have the effect of changing that decision.
Nobody wants to make this difficult matter, in which we all feel a great deal of sympathy, a matter of party politics or a Division. We want to find some way out of it, but if we can get no satisfaction we have no remedy except that of the Lobby. However, we do not want to do that as long as there is a chance of getting a satisfactory solution. Will the

Financial Secretary accept the suggestion of my right hon. and gallant Friend in the spirit in which it was made and say that he will report—if he once says he will do so, I know that he will do it genuinely and with sincerity—the strong feeling of the Committee to the Chancellor? I think that we are also entitled to ask that the Chancellor, if he feels he can do something, will make an announcement, and if he cannot do anything, will equally tell us, so that at a further stage the matter can be raised again. That is not an unreasonable suggestion, and I hope the Financial Secretary can accept it.

Mr. Glenvil Hall: I said what I did about the Chancellor's views in reply to the right hon. and gallant Gentleman the Member for Gainsborough (Captain Crookshank). He asked whether the Chancellor had any view on this, and I told him that the Chancellor had not only considered it but had come definitely to the view expressed so well by the Economic Secretary. Having cleared the ground, I went on to say that most certainly my hon. Friend and myself would see that the Chancellor was apprised of what has happened this morning, and we will convey to him the feeling that has been evinced on both sides of the Committee. Whether as a result of that the Chancellor will feel that he can make any change, or even announce he cannot make a change, I do not know. That will be for him, but what I will see is that he is fully apprised of what has happened in the last three-quarters of an hour. Then the decision he takes will have to be his. I can make no promises one way or the other.

Lieut.-Commander Braithwaite: I had hoped the Financial Secretary would have advanced rather more firmly on the bridge built for him by my right hon. Friend. However, he has just told us the matter will be placed before the Chancellor on his return from Paris. One question of procedure arises. We shall put down on the Report stage an Amendment on this matter. There is, however, no certainty, in view of the length Debate we have had, that it will be called. Should the Chancellor, on reconsideration of this matter, come to the conclusion that there is something which he would like to tell, can we have an undertaking that the Government


will put down their own Clause, which is certain to be called, and may be an improvement on ours? I think that would be a very satisfactory position.

Mr. Glenvil Hall: Of course, if the hon. and gallant Gentleman and his friends were minded to put down an Amendment on Report, that would give the Chancellor a peg on which to hang any statement he might care to make. Such an Amendment, of course, might not be selected, and if the Chancellor had something positive to say, he would find it difficult to indicate his conclusions. It was in order to safeguard him that I said what I did. I think we can leave it there. We will see the Chancellor and fully apprise him of what has been said, and I do not think I can be expected to go further.

Lieut.-Commander Braithwaite: The object of my intervention was to improve the chance of our Amendment being called on Report. Because those words are now on record, Mr. Speaker may well be influenced by the fact that there might be a possible statement by the Government. In view of the fact that we are in the fifteenth hour of our deliberations, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(ANNUAL ALLOWANCES, &C., FOR MINERAL RIGHTS IN THE UNITED KINGDOM.

(1) Subject to the provisions of this section, capital expenditure incurred by any person in connection with the working of a mine, oil well or other source of mineral deposits of a wasting nature in the United Kingdom, being expenditure on the acquisition of, or of rights in or over, the deposits shall, notwithstanding anything in section twenty-five of the Income Tax Act, 1945, be expenditure to which Part III of that Act applies, and that Act shall have effect accordingly.

(2) In relation to expenditure to which subsection (1) of this section applies—

(a) the references in the Income Tax Act, 1945, to the appointed day shall be deemed to be references to the sixth day of April, nineteen hundred and forty-nine;
(b) Part III of the First Schedule to that Act shall not apply;
(c) references in Part II of that Schedule to the expenditure to which Part III of that Act applies shall not include references to expenditure to which Part III of that Act

applies otherwise than by virtue of this section; and
(d) applying sub-paragraph (b) of paragraph 5 of the said Part II, output before the trader acquired the source shall be left out of account.

(3) Where—

(a) on or after the appointed day, a person incurs expenditure to which subsection (1) of this section applies on acquiring any deposits or rights; and
(b) those deposits or rights had previously been acquired (whether before, on or after the appointed day) by some other person, being, or being a body corporate or partnership under the control of, a person resident in the United Kingdom; and
(c) the case is not one to which subsection (7) of section twenty-eight of the Income Tax Act, 1945 (which relates to sales of sources and parts of sources as going concerns), applies,

the said expenditure of the first-mentioned person shall be left out of account for the purposes of Part III of that Act so far as it exceeds the capital expenditure incurred by the said other person in acquiring the deposits or rights:
Provided that where the source in question, or the relevant part thereof, has been worked between the dates of the two acquisitions, the said capital expenditure of the said other person shall be treated for the purposes of this subsection as reduced so as to bear to the full amount thereof the same proportion as the total potential future output from the source or part, estimated as at the later of those dates, bears to the said total potential future output plus the actual output from the source or part between those dates.

(4) Where—

(a) before the appointed day, a person incurs expenditure to which subsection (1) of this section applies on acquiring any deposits or rights; and
(b) those deposits or rights had previously been acquired by some other person, being, or being a body corporate or partnership under the control of, a person resident in the United Kingdom.

that expenditure shall, in arriving at the expenditure which, under subsection (4) of section twenty-seven of the Income Tax Act, 1945, the first-mentioned person is to be treated as having incurred on the appointed day, be left out of account so far as it exceeds the capital expenditure incurred by the said other person in acquiring the deposits or rights:
Provided that where the source in question or the relevant part thereof has been worked between the dates of the two acquisitions, the capital expenditure of the said other person on acquiring the deposits or rights shall be treated for the purposes of this subsection as reduced so as to bear to the full amount thereof the same proportion as the actual total output from the source or part from the later of those dates to the appointed day plus the total potential future output from the source or part, estimated as at the appointed day, bears


to the actual total output from the source or part from the earlier of those dates up to the appointed day plus the said total potential future output.

(5) In the cases specified in this subsection, the two last preceding subsections shall have effect subject to the following provisions, that is to say—

(a) if there is more than one such other person as is therein mentioned (that is to say, more than one person who, being, or being a body corporate or partnership under the control of, a person resident in the United Kingdom, previously acquired the deposits or rights in question), regard shall be had only to that one of those other persons who first acquired the deposits or rights;
(b) where any such other person as aforesaid carried on a trade which consisted of or included the buying and selling of, or of rights in or over, mineral deposits, references to capital expenditure shall, in relation to him, be deemed to include expenditure which would have been capital expenditure if his trade had been the working of the deposits or rights in question and had not included such buying and selling as aforesaid;
(c) in computing the expenditure of any such other persons, liabilities undertaken by him which, in connection with the disposal by him of the deposits or rights in question, have been taken over by some other person may, notwithstanding anything in subsection (2) of section sixty-four of the Income Tax Act, 1945, be taken into account.

(6) References in this section to expenditure on the acquisition or deposits or rights shall not in any event include—

(a) expenditure which, apart from this section, is, within the meaning of section twenty-five of the Income Tax Act, 1945, expenditure to which Part III of that Act applies; or
(b) expenditure on machinery or plant, or on any asset which has been treated for any year of assessment as machinery or plant; Or
(c) expenditure on any building or structure.

(7) References in this section to capital expenditure include references to any payments of minimum royalties or dead rents, or any other similar payments, being payments of royalties or rents or other payments which cannot be taken into account as deductions in computing profits or gains for income tax purposes by reason of the fact that no trade, or no relevant trade, was being carried on at the relevant time by the person making the payments.

(8) In no case shall the amount on which a balancing charge is made upon a person be increased by virtue of the provisions of this section by more than the total amount by which annual allowances made to that person are increased by virtue thereof.

(9) This section shall be construed as if it were contained in Part III of the Income Tax Act, 1945, and the reference in subsection (1) of section fifty-eight of that Act to expenditure incurred on the provision or the purchase of

property shall, in relation to this section, be deemed to include a reference to expenditure on the acquisition of, or of rights in or over, mineral deposits.—[Commander Agnew.]

Brought up, and read the First time.

5.0 a.m.

Commander Agnew: I beg to move. "That the Clause be read a second time."
The Clause is in the name also of the hon. Member for Bodmin (Mr. D. Marshall) who would have been in his place to support it but for an accident that he has suffered. The Clause provides for a new annual allowance of Income Tax in the case of the extractive industries against the cost of the acquisition of mineral rights for the purpose of working those rights for the first time. The Chancellor's Clause, which we discussed last week, confines his concession to property oversea. The new Clause, which is admittedly generous in its physical proportions but narrow in its scope, seeks to extend the benefits of the concession given in Clause 18 to enterprises situated in the United Kingdom.
The Clause is closely modelled on the Chancellor's own Clause, with, of course, the geographical difference which is the reason for it having been put down. It contains also the same safeguards for ruling out any question of the granting of an allowance where there is already an established source of income being transferred from one person to another. It is in cases different from those, in which a company acquires mineral rights in land in this country that had not been previously worked because the presence of ore bodies there had not been suspected, that it seems to us that there is a good case for the purchaser of such rights, for the purpose of working them the first time being given the benefit of the same annual allowance of tax in respect of his capital cost on acquisition of those rights as has been accorded by Clause 18 to the mining entrepreneur who does the same thing in properties oversea.
I am aware that in the discussions on the Amendments to Clause 18 the Solicitor-General referred to the Report of the Royal Commission on Income Tax, 1920, with reference to certain Amendments moved by my hon. Friend the Member for Chippenham (Mr. Eccles), and he called in aid the Report of that Royal Commission


to support a refusal to consider any question of granting an allowance of tax where mineral rights in this country are already a potential source of income and are transferred from one person to another, there being already an actual source of income involved in the transfer. But the point of this new Clause is not to contravene that principle laid down by the Royal Commission, but to consider the case, which is not an uncommon one in base metal mining, where there is land which is not known at all to be a potential source of income until the time comes when some mining company or individual deems it right to prospect the land and test it for the presence of ore bodies, and having done that to acquire the mineral rights to work the ore bodies underneath it. It is in cases such as those that it seems there is no case for withholding the new concession granted oversea to mining enterprises at home also.
For a generation, nothing has been done to encourage the base metal mining industry of this country, apart from the very moderate help which was given by the Income Tax Act of 1945, which was passed by the Coalition Government. I do not claim that this new Clause, if it is embodied in the Bill, will be an enormous help to the home base metal mining industry; but I do claim, and I do declare, that if this concession is not extended to the home industry, something less than justice will have been done to it.

Mr. C. Williams: Perhaps I may be allowed to say a word or two upon this matter, because it affects the West Country very closely, although it affects few other places, except some in Wales and possibly one in Scotland. There are few hon. Members concerned apart from my hon. and gallant Friend, as to whom I am sure everyone in the Committee would agree that we would like to hear more of his speeches after the clear way he has put this matter before the Committee. It is unfortunate that the hon. Member for Bodmin (Mr. D. Marshall) and the hon. Member for St. Ives (Mr. Beechman), who are much more closely connected than I am with these things, should not be here to put the case of the Cornish mining people.
My family has had a far longer connection with these matters than I think can be claimed by any other person in

the Committee, and I therefore have had the advantage of hearing a great deal about the considerable difficulties with which these mines have had to contend for many years. Earlier in the day we were discussing what should be done to help our mining industry in Malaya and in other parts of the world. There has been a definite help to that industry. In this country there is only a small industry in comparison, but it was an asset of value—even the small amount of tin from Cornwall was of considerable value—during the war.
Another point which I think might appeal to the Government is that it is of some advantage to keep the oldest mining industry of this country going. This type of mining had gone on long before coalmining was thought of—right back to Carthaginian times. There are some places where there are still Carthaginian workings in this country. They obviously will not benefit. I ask the Government to remember that it is vital to the interest of this country to keep some of these metal mines going. We suffered during the war because of a lack of tin and other metals, and I appeal to the Government to give full consideration to this matter.

The Solicitor-General: The hon. and gallant Member who moved this new Clause referred to the fact that I had already, when we were discussing Clause 18, deployed the argument I would now use in asking the Committee not to accept the new Clause. May I put it in this way? If the principle of this Clause were accepted, it would involve the Revenue in very heavy loss. It is impossible to say how big the loss would be, because one could not accept this principle for mineral rights in this country and limit it to that particular type of property.
Let me put, as clearly as I can, my reason for saying that the Revenue would be involved in loss. Supposing that a mining company is exploiting minerals. It is taxed under Schedule D, and pays tax on the whole of its profits, so that the Exchequer gets tax on the full amount of the profits arising from the working of these mineral deposits. Now, suppose that the mineral company has purchased the rights to exploit the minerals from the person on whose land the workings are made—the landowner—


and has paid a capital sum for those rights. The new Clause would enable him to write off against profits, allowances for the capital sum, and if the mining company was allowed to reduce its profits by writing off the capital sum paid to the landowner, the Exchequer would not get payment on the full amount arising from the profits from the exploitation of the minerals.
The State would suffer loss. There would be a source of profit untaxed to the extent that the amounts were written off against the profits in relation to the capital involved. The only way in which the State could recoup these losses would be if there was some system whereby a capital payment was taxed in the hands of the landowner. In order to safeguard the Exchequer, we should, if this Clause were accepted, have to incorporate in our taxation legislation some system whereby the capital in the hands of the landowner was also taxed. If there is a right to write off against profits the capital payment made to acquire and work the minerals, then, unless a correlative tax was imposed on the capital payment in the hands of the landowner—the recipient—the State loses the amount by which the writing off is granted. We could not accept this Clause without a correlative right to obtain tax at the hands of the landowner.
This principle is not limited only to capital payments for the purchase of mineral rights. It would apply to every premium paid to acquire a leasehold interest and it would have very general repercussions throughout our taxation system. This Clause would mean that it was practically impossible to tax capital payments, and there is no safeguard against heavy loss to the Exchequer. This is also opposed to the findings of the Royal Commission.

5.15 a.m.

Commander Agnew: I must say that I am very dissatisfied with the answer which the right hon. and learned Gentleman has given. I did not suppose that the concession would cost nothing. Every concession is going to cost something, but this is a very moderate one indeed. With regard to his citation of the report of the Royal Commission, I have the words here:
We are of opinion that no allowance should be given to incomes arising from

wasting assets which consist of proprietorship of natural resources in this country.
What the Clause seeks to do is not to give allowances of tax in respect of proprietorship but in respect of the working of those mineral assets by a company or individual.

The Solicitor-General: The Clause says:
being expenditure on the acquisition of, or of rights in or over, the deposits.…
That is what the Clause asks.

Commander Agnew: In the context of the Clause with Part III of the Income Tax Act, 1945, which it seeks to amend, it is not relief of tax on static property but on the system of taxation of mining and other allied enterprises. I was going to say when the right hon. and learned Gentleman interrupted me, that the Royal Commission goes on to say that the reasons that actuated them in coming to a negative recommendation with regard to static proprietorship is contained in Section 191, where they state that
no allowance should be granted to any asset other than an inherently wasting material asset which has been created by an expenditure of capital.
It is in just those cases where capital is going to be expended in prospecting land and working the ore that it is sought to obtain this allowance.
I do not think the right hon and learned Gentleman can say that the general principle of not giving some kind of depreciation allowance for the mining industry at home has not already been largely vitiated by the terms of the Income Tax Act itself which, in Part III, gives both an initial and an annual allowance of which, the formula for the latter is closely related to the output and total future potential output of the mine concerned. In these circumstances I think the Solicitor-General's reply is very unsatisfactory and has not met the case.

Sir I. Fraser: May I ask a question? Did not my hon. and gallant Friend make it clear that this allowance is made for mines overseas but not for a mine in this country? Surely there can be no reason for that discrimination against our own mines, whatever the complicated reasons the right hon. and learned Gentleman gave and which I do not follow. Surely there remains the fact that one makes an allowance for overseas and not for home?

The Solicitor-General: The Royal Commission said that in the case of a mine overseas it is by the expenditure of capital spent in acquiring the rights for the first time that it is brought within the purview of United Kingdom taxation. That does not apply to mineral rights in this country.

Mr. Eccles: I think the distinction between allowances given overseas and the treatment of mines at home is not right. It is based upon a purely revenue conception. The long and short of it is that if someone pays a sum of money to a foreign owner, the Revenue cannot collect anything from him because they have no jurisdiction over him. But they do now recognise in Clause 18 that, if the mining company is to have a fair deal, in the sense that it is able to recover over the life of the deposit capital invested in acquiring it and opening it up, it must have this additional allowance.
The Solicitor-General says that a different situation obtains at home because it is a British citizen who gets the capital payment for the deposit which may be under his land and that the Revenue therefore loses something. I quite agree that it does, but which is really more important—the amount of revenue involved or the production of the metal? We must look at this question from the point of view of the Revenue, and I think we should ask the Solicitor-General to reconsider this. He bases it simply on a principle of taxation, whereas we are concerned with how much tin we can get out of the soil of Cornwall rather than have to pay foreign exchange for it from Malaya.

Mr. C. Williams: I think that the right hon. Gentleman has taken a false position. If a mine in Burma or in the Far East has to pay something towards that position, is that counted for relief in taxation? Surely, if relief is given abroad, then it ought to be given in this country as well.

The Solicitor-General: If the hon. Gentleman will read Clause 18 he will see that that is what the Clause is for. It is in direct pursuance of the Royal Commission's report, and it specifically says "mineral deposits overseas."

Mr. Assheton: Has not the position been very much modified by the Town

and Country Planning Act? Under the new conditions under which minerals will be worked in the future, the mineral undertaker will be obliged to pay to the Central Land Board a development levy. I understand that under the provisions of those regulations it is possible to commute the development levy for a capital payment. In those circumstances the undertaker will not only, in the first instance, have purchased his minerals from the proprietor, but he will also be paying a development levy. Does that not rob the right hon. Gentleman's argument of a great deal of its force? He based his argument on the assumption that the Revenue was not going to obtain a great deal of benefit from this, but I think that in view of the terms of the Town and Country Planning Act, his argument loses much of its force.

The Solicitor-General: It is an additional argument against adopting this Clause.

Mr. C. Williams: In other words, what the right hon. and learned Gentleman says is that you are going to do everything you can to stop mining in this country by not giving the relief given in other countries, and at the same time imposing an additional heavy burden in the form of development of land tax. We shall be glad to know whether that is exactly what the right hon. and learned Gentleman does say. That is the meaning of what he has said, and one cannot get away from it. I am sorry he has taken that point of view.

Sir John Mellor: Would the Solicitor-General agree that whether a mine is situated in this country or overseas, the same considerations will apply because the first acquisition of mineral rights must be written off out of profits, having regard to the fact that they are a wasting asset? Looking at it from the point of view of the Revenue, the same considerations must apply. It is necessary to calculate the probable life of the mine and write off the cost of the acquisition of the rights out of profits over that period. Surely there is no distinction at all? Why should a distinction be drawn between a mine situated here and overseas? I have read carefully the recommendations of the Royal Commission, and they are most unsatisfactory; I thought the report a most illogical docu-


ment. Thirty years have passed since the recommendations were made, and I do not think we should regard them as gospel any longer.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes. 63; Noes, 187.

Division No. 194.]
AYES
[5.30 a.m.


Agnew, Cmdr. P. G.
Galbraith, Cmdr. T. D. (Pollok)
Nicholson, G.


Baldwin, A. E.
Galbraith, T. G. D. (Hillhead)
Odey, G. W.


Beamish, Maj. T. V. H.
Gomme-Duncan, Col. A.
Poole, O. B. S. (Oswetry)


Birch, Nigel
Hare, Hon. J. H. (Woodbridge)
Raikes H. V.


Bowen, R.
Harris, F. W. (Croydon, N.)
Renton, D.


Boyd-Carpenter, J. A.
Haughton, S. G.
Roberts, Emrys (Merioneth)


Braithwaite, Lt.-Comdr. J. G.
Henderson, John (Cathcart)
Spearman, A. C. M.


Buchan-Hepburn, P. G. T.
Hinchingbrooke, Viscount
Stanley, Rt. Hon. O.


Carson, E.
Hollis, M. C.
Strauss, Henry (English Universities)


Channon, H.
Hope, Lord J.
Stuart, Rt. Hon. J. (Moray)


Clarke, Col. R. S.
Hutchison, Lt.-Cm. Clark (E'b'rgh W.)
Taylor, C. S. (Eastbourne)


Conant, Maj. R. J. E.
Hutchison, Col. J. R. (Glasgow, C.)
Teeling, William


Crookshank, Capt. Rt. Hon. H. F. C.
Legge-Bourke, Maj. E. A. H.
Thomas, J. P. L. (Hereford)


Crosthwaite-Eyre, Col. O. E.
Lindsay, M. (Solihull)
Thornton-Kemsley, C. N.


Crowder, Capt. John E.
Linstead, H. N.
Thorp, Brigadier R. A. F.


Cuthbert, W. N.
Lloyd, Selwyn (Wirral)
Wadsworth, G.


Digby, Simon Wingfield
Lucas, Major Sir J.
Ward, Hon. G. R.


Drewe, C.
McFarlane, C. S.
Wheatley, Colonel M. J. (Dorset, E.)


Eccles, D. M.
Mackeson, Brig. H. R.
York, C.


Fox, Sir G.
Macmillan, Rt. Hn. Harold (Bromley)



Fraser, H. C. P. (Stone)
Mellor, Sir J.
TELLERS FOR THE AYES:


Fraser, Sir I. (Lonsdale)
Neven-Spence, Sir B.
Mr. Charles Williams and




Mr. Langford-Holt.




NOES


Adams, Richard (Balham)
Evans, Albert (Islington, W.)
Lavers, S.


Albu, A. H.
Evans, John (Ogmore)
Lee, F. (Hulme)


Attewell, H. C.
Evans, S. N. (Wednesbury)
Lee, Miss J. (Cannock)


Awbery, S. S.
Ewart, R.
Levy, B. W.


Bacon, Miss A.
Fairhurst, F.
McGhee, H. G.


Barton, C.
Farthing, W. J.
Mack, J. D.


Bechervaise, A. E.
Fernyhough, E.
McKay, J. (Wallsend)


Berry, H.
Fletcher, E. G. M. (Islington, E.)
Mackay, R. W. G. (Hull, N. W.)


Beswick, F.
Foot, M. M.
McKinlay, A. S.


Bing, G. H. C.
Forman, J. C.
McLeavy, F.


Binns, J.
Fraser, T. (Hamilton)
Macpherson, T. (Romford)


Blackburn, A. R.
Freeman, J. (Watford)
Mallalieu, J. P. W. (Huddersfield)


Blyton, W. R.
Freeman, Peter (Newport)
Mann, Mrs. J.


Braddock, Mrs. E. M. (L'pl. Exch'ge)
Ganley, Mrs. C. S.
Manning, C. (Camberwell, N.)


Braddock, T. (Mitcham)
Gibson, C. W.
Mellish, R. J.


Brook, D. (Halifax)
Gitzean, A.
Middleton, Mrs. L.


Broughton, Dr. A. D. D.
Glanville, J. E. (Consett)
Mikardo, Ian.


Brown, George (Belper)
Gordon-Walker, P. C.
Millington, Wing-Comdr E. R.


Brown, T. J. (Ince)
Griffiths, D. (Rother Valley)
Mitchison, G. R.


Bruce, Maj. D. W. T.
Guest, Dr. L. Haden
Monslow, W.


Burden, T. W.
Gunter, R. J.
Morris, Lt.-Col. H. (Sheffield, C.)


Burke, W. A.
Guy, W. H.
Morris, P. (Swansea, W.)


Butler, H. W. (Hackney, S.)
Haire, John E. (Wycombe)
Nally, W.


Castle, Mrs. B. A.
Hale, Leslie
Neal, H. (Claycross)


Chamberlain, R. A.
Hall, Rt. Hon. Glenvil
Nicholls, H. R. (Stratford)


Champion, A. J.
Hamilton, Lieut.-Col. R.
Noel-Baker, Capt. F. E. (Brentford)


Chetwynd, G. R.
Haworth, J.
Orbach, M.


Cocks, F. S.
Henderson, Joseph (Ardwick)
Paget, R. T.


Collindridge, F.
Herbison, Miss M.
Paling, Will T. (Dewsbury)


Collins, V. J.
Hewitson, Cap[...] M.
Pargiter, G. A.


Comyns, Dr. L.
Holman, P.
Parkin, B. T.


Cook, T. F.
Horabin, T. L.
Pearson, A.


Corbet, Mrs. F. K. (Camb'well, N. W.)
Houghton, A. L. N. D.
Peart, T. F.


Crossman, R. H. S.
Hoy, J.
Popplewell, E.


Cullen, Mrs.
Hudson, J. H. (Ealing, W.)
Price, M. Philips


Daines, P.
Hughes, Emrys (S. Ayr)
Proctor, W. T.


Dalton, Rt. Hon. H.
Hughes, Hector (Aberdeen, N.)
Pryde, D. J.


Davies, Edward (Burslem)
Hughes, H. D. (W'lverh'ton, W.)
Randall, H. E.


Davies, Ernest (Enfield)
Hynd, H. (Hackney, C.)
Ranger, J.


Davies, Harold (Leek)
Hynd, J. B. (Attercliffe)
Reid, T. (Swindon)


Davies, Haydn (St. Pancras, S. W.)
Irving, W. J. (Tottenham, N.)
Rhodes, H.


Deer, G.
Jay, D. P. T.
Ridealgh, Mrs. M.


Delargy, H. J.
Jeger, G. (Winchester)
Robens, A.


Diamond, J.
Jones, D. T. (Hartlepool)
Robinson, Kenneth (St. Pancras, N.)


Dobbie, W.
Jones, J. H. (Bolton)
Rogers, G. H. R.


Driberg, T. E. N.
Keenan, W.
Ross, William (Kilmarnock)


Dye, S.
Kinley, J.
Royle, C.


Ede, Rt. Hon. J. C.
Lang, G.
Sargood, R.




Shackleton, E. A. A.
Thomas, George (Cardiff)
Wilcock, Group-Capt. C. A. B.


Sharp, Granville
Thomas, I. O. (Wrekin)
Wilkes, L.


Shurmer, P.
Tolley, L.
Wilkins, W. A.


Silverman, J. (Erdington)
Ungoed-Thomas, L.
Willey, F. T. (Sunderland)


Silverman, S. S. (Nelson)
Vernon, Maj. W. F.
Willey, O. G. (Cleveland)


Simmons, C. J.
Wallace, G. D. (Chislehurst)
Williams, J. L. (Kelvingrove)


Skinnard, F. W.
Wallace, H. W. (Walthamstow, E.)
Williams, Ronald (Wigan)


Smith, C. (Colchester)
Warbey, W. N.
Williams, W. T. (Hammersmith, S.)


Smith, S. H. (Hull, S. W.)
Watkins, T. E.
Williams, W. R. (Heston)


Sorensen, R. W.
Weitzman, D.
Willis, E.


Soskice, Rt. Hon. Sir Frank
Wells, P. L. (Faversham)
Wills, Mrs. E. A.


Stross, Dr. B.
West, D. G.
Wyatt, W.


Symonds, A. L.
Wheatley, Rt. Hon. John (Edinb'gh, E.)
Younger, Hon. Kenneth


Taylor, R. J. (Morpeth)
Whiteley, Rt. Hon. W.



Thomas, D. E. (Aberdare)
Wigg, George
TELLERS FOR THE NOES:




Mr. Hannan and Mr. Bowden.


Question put, and agreed to.

First to Fifth Schedules agreed to.

Orders of the Day — Sixth Schedule.—(ALLOWANCES IN RESPECT OF MACHINERY OR PLANT.)

The Chairman: Mr. Selwyn Lloyd.

Mr. Selwyn Lloyd: In view of the length of time we have been sitting and of the complexity of the Amendment standing in my name, in page 47, line 6, to leave out paragraphs 1 and 2 and to insert other paragraphs, and other Amendments associated with it, I do not propose to move it. I hope that at a later stage and at a more appropriate hour I might have the opportunity of so doing.

Mr. Eccles: I beg to move, in page 48, line 46, to leave out "use," and insert:
efficient use for the purpose for which it was provided.
It might encourage the Committee to know this is the last Amendment we propose to move to the Bill this morning. This is a very complicated Schedule, dealing with depreciation allowances on plant and machinery, which deserves much more careful attention than we can possibly give it at this time of the morning. Sub-paragraph (6) of paragraph 1 of the Schedule lays down certain directions for the Commissioners of Inland Revenue on how to assess depreciation allowances. Normally speaking, they fix allowances at such a percentage as will write down the cost of an asset to the percentage of that cost over the anticipated normal working life of the machinery in question.
The anticipated normal life is, by subparagraph (6), deemed to be the period ending when the machinery is unfit for further use. That is really much too narrow, because, strictly interpreted, it means the period can go on until the piece of plant is utterly worn out. We think that is a bad principle, because

it would pay the works manager to go on spending far too much money in keeping a very old piece of machinery just ticking over because he could go on getting an allowance. Therefore, we think it would be better, in the interest of the modernisation of British industry, to substitute the words:
efficient use for the purpose for which it was provided.
Take the case of a ship. Broadly speaking, after 25 years or so a ship ought to be scrapped and a new one built, but, of course, old ships have been bought up by some foreign Power—we all know of one—and used for some purpose other than the original one for which they were built. That is not a good thing. There are many other examples of where in the past British firms have been inclined to keep machinery too long. Something that would encourage them to do so still more in the future is a bad thing. Therefore, for the sake of giving them an extra push towards scrapping, I think the Government would be well advised to accept our Amendment.

The Solicitor-General: I feel that there would be very considerable difficulties about accepting the Amendment. I would say at the outset that the Sixth Schedule does no more than give statutory form to what is existing practice. It has differed slightly but, broadly speaking, under the practice which has subsisted since 1918, the Commissioners have apportioned the wear and tear allowance under Rule 6 of the Income Tax Act, 1918, subject to a right to apply to the Board of Referees by way of appeal against their apportionment. I believe that there has been no appeal; in other words, the system has worked extremely satisfactorily. The practice which is now being enshrined in the provisions of the Sixth Schedule is the practice whereby, in substance, agreement is


arrived at between the Commissioners of Inland Revenue and classes of traders with regard to what should be the appropriate wear and tear allowance. What is now provided is that they have to fix an appropriate fraction to apply to what is called written down expenditure.
In answer to the Amendment, I would say that it is not as if the Commissioners of Inland Revenue under the provisions of the Sixth Schedule have to fix upon the fraction by an exact calculation of the anticipated normal life of the plant or machinery. All they have to do—this appears from paragraph 1 (3) of Part I—is to take into account the anticipated normal life. Therefore, it is not necessary to have a fraction of complete exactitude. What is indicated to them is what they must take into account in fixing the apropriate fraction which is provided by the Schedule. Therefore, they would take—and they do under the present practice—a commonsense view of the likely life of the machine in the future.
If the Amendment were adopted, it would put a very considerable burden upon the Commissioners of Inland Revenue. It would make it obligatory upon them to consider this kind of thing. A machine might be used for a particular purpose and then there might be a subsequent invention or improved machine—a perfection of the old model—and they would then have to start considering whether it could be said that the old machine could still function efficiently in the light of the fact that there were some newly approved models which might be substituted for it and work more efficiently. That would be placing a considerable burden on their shoulders. It is an unnecessary one because they have not had to do it hitherto and the system has worked adequately.
There would be other difficulties. The Amendment proposes to incorporate the words:
For the purpose for which it was provided.
Take a machine which is switched from one purpose to another. They would have to go into all that sort of thing, and that would involve very considerable complications which would not make for the smooth working of these agreements between classes of traders or users of particular machines and the Commissioners. On the contrary, it would ham-

per their negotiations and prevent their arriving at a figure which is regarded as a reasonable figure for the purposes of the fraction to be applied in fixing what is the wear and tear allowance to be adopted for the purpose of the annual allowance to be applied to the machine.
For those reasons, I hope the Committee will agree that not only does the Amendment not improve the present wording of the Bill, but that it would impose considerable hindrances in the way of the smooth working which, as I said, is the present system in practice simply translated into statutory form in the provisions of the Sixth Schedule. I hope that the Committee will agree that the Amendment should not be adopted.

5.45 a.m.

Mr. Eccles: I ought to tell the Committee that this is an Amendment which comes from industry, and they consider it desirable that some change should be made.
However, I think the Solicitor-General may have convinced the Committee that it could be done administratively. If he would take note of the fact that there is a large body of opinion in the industry which feels that these rules might well be administered in such a way as to make scrapping more attractive earlier I think we ought to let them have a try. The opportunity will arise next year of bringing this matter forward again, and I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

The Solicitor-General: I beg to move, in page 57, line 13, at the end, to insert:
(3) Notwithstanding anything in sub-paragraph 1 of this paragraph, the years for which an annual allowance is to be deemed thereunder to have been made shall not include years during which machinery or plant was used only for the purposes of activities carried on by the person in question before the commencement by him of the working of a mine, oil well, or other source of mineral deposits of a wasting nature, being activities consisting of—

(a) searching for or discovering and testing deposits, or winning access thereto; or
(b) the construction of any works which, are likely to be of little or no value when the source is no longer worked, or, where the source is worked under a foreign concession, which are likely to become valueless when the concession comes to an end to the person working the source immediately before the concession comes to an end.



This Amendment makes a change in the provisions of the Schedule for ascertaining what may be described as the notional appointed day expenditure. This Amendment deals with the case where one is concerned with capital expenditure in connection with mines or oilfields incurred before the trade begins. In the ordinary case notional allowances are assumed to have been made when the plant or machinery was used before the trade was started, on the general principle that one cannot write off against the trading profits pre-trade expenses. In connection with the expenditure on mines and oilfields that requirement should not be applied for the reason that such expenditure is, of necessity, of a wasting character. Virtually what the Amendment does is that it excepts such cases from the operation of the deduction of notional pre-appointed day expenditure which applies in the case of other types of expenditure.

Mr. Stanley: I do not know whether the Solicitor-General can throw any light on the last few lines of the Amendment which read:
or, where the source is worked under a foreign concession, which are likely to be-become valueless when the concession comes to an end to the person working the source immediately before the concession comes to an end.
It may only be the morning in my case—I see an hon. Gentleman opposite understands perfectly at once—but perhaps the Solicitor-General can explain.

The Solicitor-General: If the right hon. Gentleman will look a little higher up the Amendment he will see the phrase "being activities." These are the activities becoming valueless.

Amendment agreed to.

Schedule, as amended, agreed to.

Seventh Schedule agreed to.

Orders of the Day — Eighth Schedule.—(STAMP DUTIES ABOLISHED.)

Mr. Glenvil Hall: I beg to move, in page 61, line 34, at the end, to insert:
and no other instrument shall be chargeable with duty under the heading Agreement or any Memorandum of an Agreement as being an agreement or memorandum of an agreement for the issue, allotment or sale of any stock or marketable security.

We are inserting these words at the request of the Law Society and the Issuing Houses' Association who think there are other letters of allotment and memoranda of agreement which should be included. My right hon. and learned Friend the Chancellor of the Exchequer has agreed.

Mr. Renton: I have not found any reference to the several stamp duties which have to be paid by barristers at various stages of their careers, particularly those by King's Counsel, which are very substantial. If a clean sweep of obsolete stamp duties is being made, it would be interesting to know why there is this discrimination against this branch of the legal profession.

Mr. Glenvil Hall: It never was contemplated that the stamp duties paid by a barrister when he takes silk should be included here. I may say in addition, that the feeling has been expressed that a barrister need not become a King's Counsel unless he wishes, and that if he does so choose, then he can well afford so to become.

Amendment agreed to.

Schedule, as amended, agreed to.

Ninth and Tenth Schedules agreed to.

Orders of the Day — Eleventh Schedule

Mr. Jay: I beg to move, in page 71, line 17, column 3, to leave out from "behalf" to the end of line 20.
Perhaps I may also refer to the two following Amendments on the Paper. The Committee will remember that on Clause 12 I moved an Amendment which was to remedy the fact that on further examination we found that subsection (3) was out of Order. That was because, as far as moneylenders and refreshment house keepers were concerned, as we were making a change from the fixed date system of licensing to the system of taking out a licence for the full year, it was found that this might have imposed a new charge in the case of an applicant who died during the course of the first year. That had not been provided for in one of the Budget resolutions, and the subsection was technically out of Order. These changes to the Schedule are consequential on that Amendment.

Amendment agreed to.

Further Amendments made: In line 40, column 3, leave out from "one," to end of line 43.

In line 46, column 3, leave out from "them," to end of line 48.

Mr. Jay: I beg to move, in page 77, line 58, at the end, to insert:
6 Edw. 7. c. 20. The Revenue Act, 1906. Section nine.
The object of this Amendment is simply to remedy a small oversight in drafting the repeal section of the Bill. Section 9 of the Revenue Act substitutes a uniform duty of 10s. for the ad valorem duties previously chargeable. The duties under these headings are now abolished by Clause 31 (1) of this Bill and paragraph 6 of the Eighth Schedule.

Amendment agreed to.

Schedule, as amended, agreed to.

Bill, as amended, to be reported.

Bill reported, with Amendments; as amended, to be considered upon Monday next, and to be printed. [Bill 157.]

ELECTRICITY SUPPLIES, BRENTFORD

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. R. J. Taylor.]

5.55 a.m.

Mr. Francis Noel-Baker: I must obviously start my remarks by apologising both to you, Mr. Deputy-Speaker, and to the House, for this further detention at this hour. Perhaps I should also apologise to the wife of my hon. Friend, the Parliamentary Secretary to the Ministry of Fuel and Power, because I know that I shall have to apologise to my own wife when I get home after 15½ hours.
The matter which I have to raise is one of great importance to many people in my constituency, and is one with which I have concerned myself for some time now. It is a problem which is not confined to my own borough, though it is probably felt there as a particular hardship. As my hon. Friend knows, there is a large and important gas works on the banks of the Thames at Brentford. That works brought work and other advantages to many people there. But it has also apparently caused one disadvantage which is, that at present, out of 5,261 premises in Brentford, only 3,640 are connected with a supply of electricity. That means that, roughly speaking, for

every three homes in Brentford which have electric light and heating, one home is still without this very necessary modern convenience.
The great majority of the people living in those houses have never had the option of having electricity installed. They are anxious to know the reason for the long delay, and how much longer they will have to wait. My hon. Friend will be aware of the disadvantage in which they are placed by having only gas for heating and lighting. He will be aware that gas lighting is often very uncleanly; that it is difficult in these days to get modern fittings for gas lighting; that in small houses with low ceilings it can cause a great deal of uncomfortable heat, especially at this time of the year; and that householders have to put up with the absence of modern conveniences, wireless, electric fires and refrigerators—things which have come to be regarded as normal equipment in the modern home.
I understand that the local difficulty of providing these people with electricity in their homes does not present great problems. There are cables in, or near, all the streets containing houses which are not yet lit by electric light. I cannot imagine that technically the job of connecting these houses to mains which are already there would be difficult. I understand that the reason no action has been taken is that the Minister has issued a directive which is still in force, and which limits the connection of electricity supplies to domestic premises, except in a few special cases. But many of my constituents do not understand the reason for this directive. One of them wrote to me saying that it was unbelievable that the present Government would deny the working class electric light without some excellent reason for doing so.
Can my hon. Friend give answers to the following four questions? First: precisely what is the reason which has compelled my constituents, and many others, to wait so long for the installation of electric light? Second: whether he is satisfied that this reason is still valid? Third: when does he think that my constituents can reasonably expect to have electric lighting made available in their home in Brentford? And finally: can he give an assurance that he appreciates the real urgency of this matter and the hardship which the present circumstances


are causing to many people? It is a matter of very great concern locally, and a lot of people do not understand what is happening at present.
There are also one or two minor questions which perhaps my hon. Friend could answer. Many people are confused when they see that the restrictions upon outdoor illuminations are removed. They do not understand why, if electric current is available for that purpose, it should not also be made available to them. They also are anxious to know, in the event of their homes eventually being connected to the electric mains, what kind of installation charges they will have to pay, and what the consumption charges for electricity will be.
During the last few days some 1,200 of my constituents have signed an appeal which I shall be pleased to show to my hon. Friend, and which shows how important they consider this matter. I would be grateful if he will say that he would look at it and see what these people say. In conclusion, Mr. Deputy-Speaker, I should like to thank you for allowing me to put this question to the House after a 15½ hours' sitting, and to ask my hon. Friend to see what can be done for my constituents.

6.1 a.m.

The Parliamentary Secretary to the Ministry of Fuel and Power (Mr. Robens): Despite the hour, I have listened attentively to what my hon. Friend has said, and I am sure that it is only his keen sense of public duty which has kept him to deliver the speech he has just made. But, having said that, I cannot agree that his constituents are suffering hardship because they have only gas and not electricity; inconvenience, perhaps, but not hardship. They cannot have electric fires, but there are very good gas fires on the market; they cannot have electric refrigerators, but, again, there are gas refrigerators. I agree they cannot have electric wireless sets, but there are plenty of battery sets, so these people are not deprived of wireless.
In many spheres there are very good substitutes which the gas industry is able to provide. All the same, I agree that there is inconvenience, and the hon. Member's constituents are entitled to

know why the Ministry has asked the area boards to put in installations in a sort of priority. I need hardly remind the House that during the years of war there mounted up a backlog in the erection of power stations, and we are engaged in putting electricity into the rural areas so that we can assist the agricultural workers and farmers to do their job more efficiently. But a great deal of equipment and labour has to be used on wiring new houses, and there must be some sort of priority list to ensure that we use, to the best advantage, what is available to the best interests of all concerned.
What the Minister did was to invite area boards—and there was no question of "instructing" them—to put electricity supplies in this order: first, for essential public services; secondly, for new domestic or commercial premises; thirdly, for war damaged houses made habitable again, or houses divided into separate tenancies; fourthly, for farms and farm workers' cottages, where the county agricultural executive committee advises us that this will help toward increased food production; fifth, existing premises where the existing appliances for heating or cooking are worn out, and, lastly, where a medical certificate is produced justifying a supply of electricity on grounds of health.
That, I think my hon. Friend will agree, is not an unreasonable list, and I think that all will agree that installations should be roughly in that order. But, where the area board can extend the area of supply, well, they are perfectly free to do that. In these particular cases, they have not felt it possible to take men and materials from all the work they have to do and put them into existing houses for the purpose of putting electricity in the place of gas.
My hon. Friend says that his constituents wonder why there should be illumination outside and yet they cannot have an electricity supply. The fact is that the electrical advertising signs were already installed and that in any case they are using electricity at off-peak hours which is rather important. There is an order which, when it comes to the winter months will prevent the use of electrical signs for advertising between seven o'clock in the evening and seven o'clock in the morning. During the


summer that is not a big problem because the light hours are longer. He also asks us whether they can expect electricity soon in their homes. I cannot tell him that. That is a matter for the Electricity Board which serves his area.
Perhaps I should at this point say that the chairmen of the area boards are meeting next month to review the whole question of these priorities and to decide whether or not there is a possibility of amending them or, in the light of the supply position, improving the situation as far as supply is concerned. They will advise the Minister as to the position and the advice given to the area boards as a whole will be changed accordingly. I cannot tell him whether or not in the immediate foreseeable future his constituents will have electricity.

Mr. Noel-Baker: I have here a letter from the Southern Electricity Board which refers to the circular from which my hon. Friend quoted and which says that as long as the restrictions outlined in it are enforced they cannot undertake any development in Brentford. It finishes by saying that as soon as the restrictions are withdrawn the Board will give early consideration to the question of providing supplies in this area, which led me to imagine that the difficulty is not so much with the boards but with the restrictions imposed on them.

Mr. Robens: The supply and use of electricity is dependent upon the electricity generating supply at home which is not governed by the area boards but by the British Electricity Authority. The chairmen of the area boards will be meeting next month to review the whole supply position and to deal with the question of priority lists. We shall have advice

as to what is the position in the matter of raising some of the restrictions we have put down.
The other question which my hon. Friend asked was what the installation charges would be and what would be the rate for electricity at the time they are connected up? Those are matters for the area board which is in sole control of charges and installation costs and so on. The hon. Member and his constituents should make use of the services of the consultative council for that area if they feel the installation charges are unfair or that they are not being fairly treated as to the charges for electricity when the installations are completed. The area boards are most anxious to increase their areas of supply and they probably will continue to act in a competitive spirit in relation to gas undertakings in the same area. So far as restrictions are concerned we laid them down to boards in the best interests of the country, bearing in mind the supply position and the necessity for fulfilling urgent tasks before we substituted one form of illumination for another.

Mr. Linstead: May I ask the Parliamentary Secretary one question? I understood him to say that in the winter external illuminations would be prohibited between seven in the evening and seven in the morning. I am wondering whether it is not the other way round.

Mr. Robens: I am very sorry. I did say that. Of course it is the other way round.

Adjourned accordingly at Ten Minutes past Six o'Clock a.m.